Leeds Building Society has said it will no longer offer mortgages for second homes, saying they simply “lie empty” and are not contributing to the economy at a time when housing stock is running critically low.
The lender’s chief executive, Richard Fearon, said on a call with FTAdviser last week (July 29) that he did not think second homes were compatible with the business' purpose, which was to put home buyers first.
In its half-year results, Leeds BS said its total membership grew to 815,000 between January and June 2022, with net lending growth of £600mn. This was driven in part by 9,000 first-time buyers getting a mortgage with the society during this period.
“Second homes reduce the number of properties available to live in and we want to direct more of our efforts to other sectors, especially first-time buyers,” said Fearon.
The building society boss said reducing the number of properties available for people to live in at a time when the UK’s housing supply is “inadequate to meet demand” did not make sense, which was why the lender has withdrawn from lending on second homes.
“We don’t think second homes are compatible with our purpose, which is to put home buyers first,” the chief executive explained. “These houses often lie empty and don’t contribute to the economy.”
Fearon believes Leeds BS is one of the first lenders to make such a concretive move.
“I can’t comment on what other lenders do,” he said. “I can say we’ve thought about it very, very carefully. New homes are significantly undelivered. So one way of tackling that is by making use of existing housing stock.”
A second home is not the same as a holiday let, which is let out for at least 24 weeks of the year. Second homes are, contrastingly, not let out - often being used by those with jobs which take them around the country.
“To be absolutely clear, we still lend on holiday homes,” said Fearon. “They tend to be occupied most of the year.”
The Conservative party’s 2019 election manifesto pledged to build 300,000 new homes in England every year by 2025.
However, various obstacles sit in front of this target. One is the government’s own environmental rules which seek to protect rivers and waterways from pollution by placing limits on development on protected sites in England.
Another is the recent revelation that West London could be facing up to a ten-year new homes ban due to an electricity grid hitting capacity.