New Planning Rules May be Hit by Mortgage Constraints.

by Mark Johnston

New Planning Rules May be Hit by Mortgage Constraints.

It seems that with housing market demand still very weak, increasing numbers of home owners may opt to improve rather than move.

For the next 3 years the government plans to waive any requirement to seek planning permission when extending 8 metres from detached properties or 6 metres from semi detached and terraced homes.

David Cameron, the prime minister, has promised to relax planning restrictions to allow families to build modest extensions to their homes in a bid to “get Britain building….to get Britain working”. He added that this move will help revive construction and create around 140,000 jobs.

Although some experts have been left wondering how the prime minister can be confident that building conservatories will help the economy to grow.

Chris Wojtulewski, director of the planning consultants Parker Dann, said “although relaxing red tape is welcomed, the changes to allow people to extend their properties without planning permission are a concern, especially in urban areas. This could also cause neighbourly issues”.

 However, Nationwide Building Society reckons that homeowners who take the plunge by extending or improving their homes could make sizeable gains. According to their research based on an average 3 bedroomed home, adding and extension or loft conversion could increase its value by up to 23 per cent.

Although it is worth bearing in mind that the cost of major extensions can be substainal. A single storey extension to a typical home can cost an estimated £23,000, while a two storey extension can cost an estimated £76,000.

Many experts believe that while these plans may help some home owners, especially those who need more room but who are unable to move. However, unless they have the necessary cash they will have to borrow it and therefore many will find it difficult in the current financial economy to raise the finance needed.

Lending is tougher than ever before so getting a mortgage lender to advance the required funds will not be as easy as it was in the past.

David Hollingworth, of mortgage brokers London and Country, says “mortgage availability remains constrained. Existing borrowers are not immune; those seeking further advances may struggle more than those looking for a home buyer loan”.

Unfortunately many borrowers’ credit ratings are likely to have declined since they took out their initial mortgage and the property may have also fallen in value, not least because valuations are carried out more stringently.

A new valuation may show reduced equity and lending criteria is now much stricter, therefore borrowers looking to fund extensions through their current mortgage could find they may not even qualify for their existing loan if they applied for it today, meaning further advances on the same terms would be out of the question.

 

It appears then that extending a mortgage could be a lot more problematic and expensive than extending the property.

In conclusion more must be done to encourage banks and building societies to advance mortgages if easing planning restrictions is to have much practical effect.



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