Ipswich Building Society recently confirmed they will now be lending on Modern Methods of Construction properties.
MMC is set to become a more mainstream term as the government announced it would be prioritising its use to help to rectify the shortage of new homes in the UK.
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What does MMC stand for?
Modern Methods of Construction. Also known as ?smart construction?, it uses off-site construction practices in factories for more efficient, effective mass production in building. “…a process to produce more, better quality homes in less time.” – Office of the Deputy Prime Minister and the Housing Corporation
Why is it important now?
“The government will use its purchasing power to drive adoption of modern methods of construction, such as offsite manufacturing” – The Autumn Budget 2017
… which means MMC looks to be favoured in 2019 public infrastructure schemes, and that, according to The Farmer Review, is likely to transfer to the commercial housing market.
61% of housebuilders are investing in site-based modern methods of construction – Housebuilding Report, Lloyds Bank, 26th Jan ‘18.
Is MMC the same as prefab?
Popular in the Second World War, prefabricated housing was used to accommodate military personnel. ‘Prefabs’ were also built using steel, aluminium, and timber or asbestos after the war as a quick and cheap replacement for the houses destroyed during the Blitz – entire estates were built for those made homeless by the war.
Today’s prefabricated houses are considered more stylish and upmarket:
– Closed-Panel Systems: Entire walls complete with cladding, doors, windows and ducting for wires/pipes are fabricated in factory before being transported and lifted into place using a crane.
– Open-Panel Systems: The external cladding and joinery is fitted on site without a
crane. Handy when access is restricted.
– Structural Insulated Panels (SIPs): This idea came to the UK from America in 2000 and provide excellent energy efficiency as the walls and roof are made from solid slabs of insulation
– Oak Framing: Often constructed off-site, oak frames are quickly erected and encapsulated with highly insulated panels.
Is it harder to get a mortgage for an MMC property than for a more traditional build? There will be different terms and conditions for self build mortgages, depending on the lender, and every lender has its own approach to MMC.
Many mortgage lenders are concerned about the quality of MMC homes, and so lending capacity is restricted – self-builders may find financing their MMC property a challenge.
If you’re looking for a mortgage on a MMC property then it can pay to approach a building society: “Building societies are generally receptive when it comes to accepting MMC as suitable security for mortgage purposes, particularly those that lend in the self-build market as they are more experienced in assessing the potential risks of non-standard construction types.” – Building Societies Association
Those who are in any doubt about which mortgage is best should seek advice from a specialist mortgage broker.
If you’re building your own home or looking to buy an MMC property, what documentation do you need before approaching a lender?
For any mortgage application, borrowers require the following: utility bills, three months of payslips, a P60 from their employer, proof of any benefits received, proof of identity (such as passport or driving license), 3-6 months of bank statements (print outs may not be accepted). Self employed applicants will need account statements from an accountant covering the last two or three years, an SA302 tax return form, and further supportive bank statements.
For a self build mortgage application, borrowers require the following: copies of their planning permission, construction drawings and specs, total project cost estimate (including fixed-price contracts where possible), Building Regulations approval (including SAP calculation), site insurance and structural warranty, and their credit report. If applicable, they will also need to provide their architect’s professional indemnity cover (if required).
New Homes Warranty is a 10 year insurance policy to protect buyers of new homes from structural defects (acceptable providers of these warranties will be decided by the mortgage lender).
Buildings insurance must be arranged by borrower to at least equal the rebuild cost of the property. Some lenders may wish to visit the site to assess the project’s marketability in more depth, gauge risk exposure, and decide if the property is to be erected in a desirable location.
Although not routinely requested, accreditation through the Build Offsite Property Assurance Scheme (BOPAS) may be of use. It comprises: a durability and maintenance assessment, a process accreditation, and a web-enabled database comprising details of assessed building methodologies, registered sites and registered/warranted properties.
Ipswich Building Society’s Press Release for enhanced self-build lending criteria
Enhanced self-build lending criteria at Ipswich Building Society
Modern methods of construction (MMC) a boost for self-build & ‘prefab’ mortgage borrowers
Ipswich Building Society has enhanced its self-build lending criteria to accept modern methods of construction (MMC). The change relates to new borrowers in addition to those looking to re-mortgage and applies across the Society’s existing range of mortgage products, including its recently relaunched self-build discount product which has a decreasing early repayment charge of 3% – for the first twelve months and zero for the remaining twelve.
MMC typically involves fabricating the structural units of a building off site, or manufacturing them on site by contemporary methods, and is an increasingly attractive option for self-builders. In a survey of 250 house-builders by the Build Show, 67% said that MMC will play a key role in new-home supply in the UK* with almost two thirds of housebuilders believing that manufacturer innovation will play a key role in new home supply.
Within the Society’s new rules, the applicants’ chosen scheme must be accredited through the Buildoffsite Property Assurance Scheme (BOPAS), an initiative jointly developed by Buildoffsite, The Royal Institution of Chartered Surveyors, Lloyd’s Register and Building LifePlans Ltd, in consultation with the Council of Mortgage Lenders (now UK Finance) and the Building Societies Association. BOPAS provides lenders with assurance that the properties against which they may be lending will be sufficiently durable and readily saleable for a minimum of sixty years.
All mortgage applications will be considered on a case by case basis, underpinned by the Society’s individual underwriting specialism, designed to drive diversity in the mortgage market.
Richard Norrington, CEO at Ipswich Building Society, commented, “Through our commitment to seeing diversity in mortgage lending, we have made changes to our lending criteria to further support the growing community of self-builders.
“I am delighted that we continue to offer mortgage applicants an alternative to the machine-only mortgage application processes used by some larger lenders. By assessing each mortgage application on its individual merits, we can take a true assessment on credit-worthiness, and make an informed decision when lending.”
The Society’s mortgage products benefit from a 50% fee free overpayment facility, whereby borrowers can overpay penalty free by up to 50% of the original loan amount, all of which are available to direct applicants in England and Wales and via selected intermediaries. For borrowers overpaying in excess of their 50% allowance, or for early redemption of their loan, an Early Repayment Charge applies.
This product features a 50% fee free overpayment facility, whereby borrowers can overpay penalty free by up to 50% of the original loan amount. For overpayments in excess of this amount, or early redemption, there is an early repayment charge of 3% for the first twelve months from completion date, and no early repayment charge for the remaining 12 months of the product. In the first twelve months the early repayment charge is calculated for overpayments on the total overpayment amount, and for early redemption on the original loan amount.
About Ipswich Building Society
Ipswich Building Society has approximately 65,000 members and currently has over 80,000 savings accounts and over 5,000 mortgage accounts. There are nine branches across Suffolk in Aldeburgh, Saxmundham, Halesworth, Woodbridge, Princes Street Ipswich, Ravenswood Ipswich, Hadleigh, Haverhill and Sudbury. The Society also has 2 agencies in Suffolk.
80% of the Society’s members live in the East of England with the remainder living across the UK. Ipswich Building Society was established in 1849. See www.ibs.co.uk