Mortgage drought stalls builders

The country’s sixth largest housebuilder Redrow, says a chronic shortage of mortgage availability and down valuations are stopping new homes from being built.

Steve Morgan, chairman of Redrow made the comments as he announced a pre-tax loss in the six months to December 2009 of £8.7m compared with a loss of £46.2m in the same period last year.

Redrow’s cancellation rate is running at around 18% and he says the overwhelming reason is due to mortgage availability and/or down valuations.

Morgan says: “Aside from planning, the other significant obstacle to Redrow increasing output is the chronic shortage of available and suitable mortgage product combined with the persistent and ongoing issue of down valuations by valuers acting for the mortgage lenders.

“This is a particular issue for first time buyers, who desperately need the return of the 90% and 95% mortgage.”

He adds: “We strongly urge the government to join with the home building industry and consider the introduction of a government/industry insurance indemnity scheme, which would enable lenders to provide up to 95% mortgages once again.”

He says until the dual issues of planning and mortgage availability are resolved the house building industry has little hope of making real inroads into the country’s current chronic shortage of housing.