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Housing minister calls on banks to support self-build revolution

20 Jun 11 Housing Minister Grant Shapps is calling on mortgage lenders to back people who want to build their own homes with specialist finance products.

Mr Shapps has sent a letter to the UK’s biggest mortgage lenders urging them to back a 'self-build revolution' by lending more to those aspiring to build their own home.

In the letter, prepared following discussion with industry and the Building Societies Association, he says that he wants to see building your own house become much more common, to generate supply of affordable and sustainable homes.

The self-build movement provides more homes than any single housebuilding company, Mr Shapps says, but it is still far smaller than in many other countries, and could double in size over the next decade.

Lenders often shy away from the self-build lending market due to the higher perceived risk, but with typical interest rates on self-build products at around 6%, Mr Shapps says that the self-builder is an attractive prospect with growth potential

He encourages lenders to make more widespread use of indemnity insurance and 'build out' cover to mitigate the risks of self-build projects not being finished. He also cites experience from one specialist self-build intermediary that indicates that of the 15,000 funded self-build projects started over the past decade, fewer than 50 have been repossessed.

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"Self-builders deliver affordable, greener and more innovatively-designed homes; and make a big contribution to the number of new homes built in this country, yet there is scope to significantly increase the number of self-built homes in the UK - both for individual households and for community-driven projects,” Mr Shapps says.

"I want to create a self-build revolution where building your own home is not just the preserve of the privileged few and as the mortgage market continues its recovery, lenders have ideal opportunity to diversity lending into areas such as this. With expert knowledge from established intermediaries, lenders can make a profit at low risk.

"I think there are real business opportunities for lenders here - as the market grows - and I call on them to help make this important housing sector more mainstream."

Mr Shapps’ call was backed by BuildStore Financial Services chief executive Raymond Connor, who said: "Compared to the wider housing market, demand for self-build finance is continuing to grow, so we would like to see more lenders respond to the self-build market, and offer more practical products in order to serve the sector appropriately. The self-build market offers high quality lending, and with our development of systems and products which reduce lender's exposure to risk, this presents a great opportunity to provide funding in a growing market, currently worth £2bn annually. As well as enabling more people to build the homes they want and need, funding the self-build sector also helps to boost local economies and supports the construction supply chain."

Martin Bell, head of customer lending at Norwich and Peterborough Building Society, said: "While many may think a self-build project is beyond them, it is likely to be much cheaper than buying an existing property and the satisfaction of living in a home that you have seen built from scratch is difficult to match. We are more than happy to talk people through the options available."

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