Builders offer to cover home loans ‘to keep prices high’

Developers are offering to pay buyers’ mortgages as they resist reducing the prices of their homes.

One builder, Fairview New Homes, is offering cash sums of up to £30,000 equivalent to a discount on mortgage rates of 2.5pc for two years.

The developer says buyers can use the savings to cover the cost of buying a new car, having their groceries covered for up to two years or holidays.

This comes after the developer launched its “Buddy Up” scheme, which offers £2,000 for legal fees and advice and either a 5pc deposit boost and a £5,000 John Lewis voucher or a Stamp Duty grant and a £5,000 furniture pack for those buying with friends.

Another company, Stonebond, promises a discounted mortgage rate of 3pc for two years, compared with a rate of about 5pc-6pc available at highstreet lenders.

On a £ 500,000 property with a 25pc deposit, the developer says it will pay up to £16,875 to take a mortgage rate of 5.25pc down to 3pc. The incentive will be paid as an allowance when the sale is completed.

Hayfield Homes recently advertised a Tesla, costing £40,000 to £60,000, for the buyer of a £660,000 four-bedroom home at a development in Bromham, Bedfordshire.

Other incentives being launched by builders include so-called “rent to buy” schemes, in which a tenant pays rent to the developer for a set period that constitutes their deposit, before applying for a mortgage. Large devel

‘Try to understand a new build’s premium against the second-hand market before making an offer’

oper Barratt Developments has launched a pilot programme that allows buyers to put down just a 2.5pc deposit upfront, before using six months’ rent to form the other half of their 5pc deposit.

Adrian MacDiarmid, head of mortgages at Barratt, said: “Instead of paying private rent that eats up all their savings, [ buyers] can put that money to good use as part of their deposit, all while they are enjoying living in their new home.”

Emma Fildes, a buying agent in London, said the developers were using all the tricks of the trade to keep prices high. “It looks better land register-wise,” she said, adding that buyers must disclose any incentives they are offered to their mortgage brokers.

She said smaller companies were more likely to bring down their prices as offering more significant incentives, including carpeting and fittings, was more difficult for them.

Buying agent Alex Mosley, of Perrygate in London, said buyers who are offered incentives should be aware that the property price might not offer a fair value. “Always try to understand a new build’s premium against the second-hand market before making an offer,” he said.