You are here: Home - Mortgages - First Time Buyer - News -

Micro homes: a solution or a problem for first-time buyers?

Written by:
Micro homes, defined as properties smaller than 37 square metres, are being increasingly built, bought and sold, creating a possible conundrum for lenders.

According to the Which? research, approximately 8,000 such micro homes were built in 2016. However, with several of the major lenders, including Nationwide Building Society and RBS, not lending on properties smaller than 30 square metres, this can cause a problem for potential buyers.

David Blake, principal mortgage adviser, Which? Mortgage Advisers said: “With the average London micro property selling for £279,000, smaller homes can represent a more realistic opportunity for many but can also be harder to mortgage.

“Smaller properties can put lenders off due to concerns around the future value of the investment. However, there are mortgage lenders that are receptive to properties of this nature, if demand is high enough and sustainable.”

‘It’s all about saleability’

Ray Boulger, senior technical manager at John Charcol, said: “Pretty much every lender has a restriction on size for studio flats, and micro flats could be considered a sub-set of these. However, if there continues to be significant new developments of such flats, lenders may have to reassess their criteria.”

He explained: “It’s all about saleability. If the flat is repossessed could it be subsequently resold? Provided there is good demand some lenders will be prepared to lend but will perhaps reduce the Loan to Value (LTV) to 75%.”

This appears to chime with the experience of modular flat provider Pocket Living. It supplies “compact” one-bedroom flats that are 38sqm, which it was at pains to point out “complies with national Space Standards and are therefore not micro”.

The builder added: “Pocket buyers haven’t experienced any difficulty in obtaining a mortgage because of the size of the homes.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

Which ISA is right for you? A round up of the six products available in 2017

From cash to innovative finance to lifetime, here's our guide to the ISA products available to savers this yea...

Guide to buy-to-let tax changes

In late 2015, former Chancellor George Osborne announced a range of  tax measures aimed at landlords, which t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Five fund tips for a 0.25% interest rate environment

With interest rates stuck at a record low 0.25% and expectations rates could fall to close to zero, here are ...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Investing your money

Alliance Trust Plc gives you smart insight into how to invest your money

Money Tips of the Week

  • RT @j_g_henderson: It's been an interesting couple of weeks for stock markets, and on @YourMoneyUK Nick Dixon sets out his six golden rules…
  • RT @j_g_henderson: It's been an interesting couple of weeks for stock markets, and on @YourMoneyUK Nick Dixon sets out his six golden rules…
  • RT @j_g_henderson: It's been an interesting couple of weeks for stock markets, and on @YourMoneyUK Nick Dixon sets out his six golden rules…
Read previous post:
buy to let
Retirement Advantage unveils landlord equity release products

Retirement Advantage has launched a range of equity release products for owners of buy-to-let properties and second homes.