Mortgage experts say self-build key to securing more homes

A report from Mortgage Advice Bureau says self-build homes - also known as custom build homes - could be the key to boosting housing supply in the UK.

The report concludes that custom build homes are cheaper to construct, allow for greater consumer involvement, present less risk to mortgage lenders and could introduce a large number of new plots into the new homes market very quickly.

However, for custom build to fulfil its potential MAB says local authorities must make better use of Section 106 planning agreements to ensure custom and self build is given favourable planning permission.

MAB says custom build properties are 15 per cent cheaper to construct on average as builders do not have the additional marketing costs - used by speculative builders to shift stock - and their overheads are greatly reduced.

Builders also need far less working capital as they no longer hold a land bank and are paid in staged payments as they build the property. Reducing builder costs and margins provides instant equity to the homeowner. This in turn substantially reduces risks for lenders, which should increase their willingness to lend.

The MAB report claims to show that the current planning system is geared towards speculative new builds: larger builders have the resources to spend heavily on land and can battle the planning system to secure planning permissions.

MAB says to level the playing field, government and industry must educate local authorities to make better use of Section 106 planning agreements and compel them to provide favourable planning consent for custom build to boost new housing stock.

For example, overall planning for large schemes could depend on elements of custom build being present throughout the site. In some cases, whole sites could be given permission exclusively for custom/self build.