Secured Loan on a New Build Property

The New Build Premium and Value Depreciation

New build properties are typically priced at a premium over equivalent second-hand properties in the same area — reflecting the brand new condition, developer marketing costs, the warranty included in the purchase and the consumer preference for new homes. This new build premium is often estimated at between 5% and 15% above comparable second-hand property values, though it varies by location, developer and market conditions. Recent research from Rightmove and Hometrack suggests premiums are lower in some regions following cooling demand in 2023-2025.

The practical consequence for secured lending is that if a new build property is sold within the first few years after purchase, it may achieve a lower price than the original purchase price — particularly if the buyer paid over the odds during a period of strong developer demand. Lenders are aware of this and factor it into their assessment of the maximum loan-to-value they are willing to offer on new builds.

Many lenders apply a reduced maximum LTV for new build properties in the first two years after completion — commonly capping at 75% rather than the 80-85% available on established properties. After two or three years, once the property has an established market value based on comparable resales in the development, lenders often revert to standard LTV limits. If you purchased your new build property some time ago and its value has increased, this restriction may no longer apply.

NHBC Buildmark and Other New Build Warranties

Most new build homes in the UK are sold with a warranty — the most widely known being the NHBC Buildmark warranty, which provides cover for structural defects for 10 years from the date of practical completion. Other widely used warranties include LABC (Local Authority Building Control) Warranty, Premier Guarantee, Advantage HCI and Checkmate. These warranties are a key component of the new build purchase package and are typically required by mortgage lenders as a condition of lending on a new property.

Secured loan lenders will also want to be confident that an appropriate warranty is in place, as it protects the security value of the property in the event of structural defects. In practice, most new builds less than 10 years old will have a warranty in place, and the key detail for lenders is which warranty provider is used and whether the warranty is still active.

For properties that are approaching or have passed the 10-year warranty period, the absence of a warranty is not generally a barrier to secured lending — the property will be assessed on its current condition by the valuer rather than relying on warranty protection. However, evidence of good maintenance and the absence of defects will be important. The NHBC Buildmark 2025 product updates also provide for a two-year defects period with direct developer responsibility, followed by eight years of structural cover.

Developer Incentives and Their Impact on Lending

When purchasing a new build property, developers frequently offer incentives to buyers — these might include cashback, contributions to stamp duty or legal fees, furniture packages, free upgrades, or guaranteed rental income for a period. While attractive to buyers, these incentives can create complications for lenders because they effectively reduce the true cost of the purchase below the headline asking price.

Lenders are required to be told about any incentives received as part of a new build purchase and typically deduct the value of the incentives from the purchase price when calculating LTV, following guidance from UK Finance and CML (now part of UK Finance). For example, if you bought a property for £300,000 with a £15,000 developer cashback incentive, the lender may treat the effective purchase price as £285,000 for LTV calculation purposes. The typical rule is that incentives exceeding 5% of purchase price are fully deducted; below 5%, treatment varies by lender.

On a secured loan application for a new build, lenders will check whether any incentives were received at the time of purchase and may adjust their valuation accordingly, particularly if the original purchase was recent and the property has not yet been independently valued in the resale market. Providing full details of any incentives received — and copies of the purchase documents confirming the original price and any incentive deed — will help the lender and valuer assess the current situation accurately.

Which Lenders Accept New Build Properties as Security?

The good news for new build owners is that the majority of secured loan lenders will accept new builds as security, unlike some of the other property types discussed elsewhere on this site. The restrictions are primarily around LTV ratios and the recency of the purchase rather than outright exclusions. Most lenders become significantly more comfortable once a new build is two to three years old and has an established value based on comparable sales within the development.

For very recently purchased new builds — within the first 12 months — lenders may be more cautious, particularly if the development is not yet complete or if comparable sales are limited. In these cases, the valuer may struggle to provide an accurate open market value, which makes lenders nervous about the security they are being asked to accept.

Help to Buy equity loan properties (for those who purchased using the Help to Buy scheme) add an additional layer of complexity, as the equity loan from Homes England must be considered in the LTV calculation and Homes England’s consent may be required for a second charge. The Help to Buy scheme closed for new applications on 31 October 2022 in England, but existing equity loans remain in place and can affect secured lending options for years to come. A broker who regularly handles new build secured loans will know which lenders are comfortable with recently completed properties and can match your application to the most appropriate lender based on the age and characteristics of your property.

Indicative Lender Treatment by Property Age

The table below summarises how specialist second charge lenders typically treat new build properties at different ages. Criteria change — confirm the current position with your broker.

Property Age	Typical Max CLTV	Help to Buy Case	Incentive Treatment
< 6 months since completion	70-75%	Case by case	Full deduction >5%
6-12 months	70-75%	Accepted (HE consent required)	Full deduction >5%
1-2 years	75-80%	Accepted	Assessed in valuation
2-5 years	80-85%	Accepted	Not usually relevant
5+ years	80-85%	Accepted	Not usually relevant

Typical specialist lenders for new builds include Pepper Money, Precise Mortgages, Together Money, United Trust Bank, Shawbrook Bank and Norton Home Loans. If you have a Help to Buy equity loan in place, expect an additional 3-6 weeks for Homes England consent, and make sure you have the current equity loan balance statement available — the interest-free period lasts five years before monthly interest begins accruing at 1.75% in the sixth year, rising by RPI+2% thereafter (check the latest rates with Homes England).

Worked Example: Three-Year-Old New Build with Help to Buy

Consider a borrower who bought her new build three-bedroom house in the West Midlands three years ago for £310,000 using a 20% Help to Buy equity loan of £62,000, a 5% personal deposit (£15,500) and a 75% first charge mortgage of £232,500 at 3.89% (fixed for two more years). The property is now valued at £340,000 and her first charge balance is £220,000.

Her equity position: property value £340,000 less first charge £220,000 less Help to Buy equity loan (now £68,000 — 20% of current value) = £52,000 of owner equity. She wants to raise £25,000 to fund a conservatory and garden landscaping.

Her broker approaches Pepper Money, which accepts Help to Buy cases subject to Homes England consent. Pepper offers a 10-year second charge at an APRC of 9.9%, monthly payment of £327, and total amount payable of approximately £39,240 including fees. CLTV including the Help to Buy equity loan would be 92.6%, just within Pepper’s 95% ’all-in’ limit for Help to Buy cases. Homes England consent takes four weeks. The ESIS clearly sets out the APRC, monthly payment, total payable, any ERC and the seven-day reflection period. She proceeds and completion is achieved in nine weeks including Homes England review.

Consumer Protections and Regulatory Framework

A regulated second charge mortgage on a new build benefits from FCA MCOB protections, the Consumer Duty (in force from 31 July 2023), and the statutory seven-day reflection period. You must receive an ESIS before committing, setting out the APRC, monthly payment, total amount payable and any ERCs. The Consumer Duty fair value and clear communications tests are particularly relevant for new build cases given the complexity of incentives, warranties and Help to Buy arrangements — your broker should ensure you understand the full picture before signing.

Complaints go first to the lender. If the response is unsatisfactory or absent after eight weeks, you can escalate free of charge to the Financial Ombudsman Service (FOS), which can award up to £430,000 for acts or omissions from 1 April 2025. Issues with the new build itself (defects, incomplete finishing, developer snagging) are typically covered by the NHBC/LABC/Premier warranty and handled through the warranty provider’s dispute resolution process, which includes the NHBC Resolution Service.

FSCS deposit protection of £85,000 applies to any deposit accounts held with authorised firms but does not extend to the loan obligation. The PRA regulates prudential standards for banks and building societies; the FCA regulates conduct and consumer protection. Always verify lender and broker authorisation on the FCA Register, and keep copies of your ESIS, loan agreement, incentive documentation and any Help to Buy correspondence securely.