Two of the UK's largest high street banks, NatWest and Barclays, have made a significant announcement that will impact prospective home movers, particularly those looking at new-build properties.
What the Banks Are Offering
NatWest and Barclays have confirmed they will now support new-build home purchases with loans up to 95 per cent of the property's value. This marks a substantial increase in the amount buyers can borrow, significantly reducing the deposit required to get on the property ladder.
NatWest has detailed that for new-build houses, the maximum Loan-to-Value (LTV) ratio has been raised from 90 per cent to 95 per cent. For new-build flats, the maximum LTV has increased from 85 per cent to 90 per cent.
Barclays has specified that its increased LTV offer applies to new-build houses with a maximum value of £600,000. The bank has also clarified that the deposit must come from the applicants' own funds, and that standard affordability and credit checks will still apply.
Expert Reactions: A 'Reckless' Move or a Welcome Opportunity?
The lenders' decision has drawn a mixed response from industry experts, with some warning of severe risks for borrowers.
Darryl Dhoffer, Founder at Bedford-based The Mortgage Geezer, was highly critical, labelling the move as "reckless" by the banks. He explained that the slim 5 per cent buffer is instantly negated by the 'price premium fade' typical of new-build properties. He warned that if the upcoming Budget from Chancellor Rachel Reeves causes a drop in house prices, negative equity could "explode," leading to mass borrower defaults and substantial bank losses.
Dariusz Karpowicz, Director at Albion Financial Advice in Doncaster, agreed. He compared the decision to buying a new car with borrowed money, noting you lose value immediately. "New builds typically sell at a premium that disappears once you move in, wiping out your 5% deposit instantly," he said. He cautioned that even a slight property price drop could trap buyers in negative equity from the outset.
Karpowicz also pointed out that the government's Mortgage Guarantee Scheme protects the banks, not the borrowers. He suggested that lenders are scrambling for business as developers face falling reservation numbers, and urged potential buyers to save for a larger deposit instead.
The Other Side of the Argument
Not all commentary was negative. Justin Moy, Managing Director at EHF Mortgages in Chelmsford, viewed the announcement as lenders actively hunting for lending opportunities.
He noted that Barclays appears to be using the Mortgage Guarantee Scheme to facilitate these higher LTV loans, a measure that primarily benefits the lender. With the popularity of new-build homes remaining traditionally strong but reservation numbers falling recently, this policy shift from Barclays and NatWest is likely to be of serious interest to both buyers and developers.
This move signals a major shift in the mortgage market for new-build properties, offering a potential lifeline for buyers with smaller deposits, but amid strong warnings about the financial risks involved.
