New builds often come with a premium charged by the properties’ builders, which contributes to the price gap between new build homes and existing properties.
Currently, this gap sits at around £60,000, according to Office of National Statistics data.
Skipton pulled out of the 95 per cent loan-to-value market in March 2020. It then re-entered the space for existing properties earlier this year.
Today (June 17) it launched two new build mortgage products at 90 per cent loan-to-vale, a two-year fix at 3.16 per cent and a five-year fix at 3.51 per cent.
Jenna Cauvin, a product manager at Skipton, told FTAdviser: “We’ve only gone back in with 90 per cent loan-to-value for new build houses because we need to remain a responsible lender.”
Cauvin said borrowers with a 5 per cent deposit who sell their property in the short-term, such as a year later, run the risk of falling into negative equity.
“We don’t want this. Everyone has their different appetites for risk. But the evidence around the new build premium has informed our decision not to go down that route.”
Negative equity is when the current value of a home is less than the amount owed on a mortgage.
Broker First Mortgage released research this month which found almost two in three first-time buyers (61 per cent) are worried their house would be worth less when they look to sell or move than the price they originally paid for it.
A further 42 per cent of those surveyed said that negative equity was something they thought would cause them issues in the future.
"Whilst the stamp duty holiday offers potential for a great saving, the current high demand for purchase means that prices are rising above the savings which can be made,” said David McGrail, First Mortgage’s compliance director.
“It is important for buyers to be patient and wait for the right opportunity to purchase rather than trying to beat the deadline.”
House prices were on a steady eight-month rise since the government’s stamp duty break implemented in July.
But ONS data published yesterday showed between March and April this year, average house prices on a seasonally adjusted basis fell by 2.2 per cent. Year-on-year, house prices are still up 8.9 per cent.
Karen Noye, mortgage expert at Quilter, said: "This drop [in house prices] could be a worry to those who have already completed or about to complete using the 95 per cent mortgage scheme as they face the very real prospect of negative equity if house prices go too low."