There are “only a handful” of banks and building societies that offer mortgages for self-build houses in rural areas of NI, a mortgage adviser has said.

“It’s a small market to start with, plus a lot of them have very particular requirements around what they will and won’t accept,” said Pat McDaid from Derry-based firm McDaid Mortgages.

Self-builds

A common problem arises with self-builds if the initial stage of construction is funded by savings, then a mortgage is only applied for when the house is partially built.

“Some lenders will automatically rule themselves out because they haven’t been involved in the project from the start,” McDaid told the Irish Farmers Journal.

Other factors that can put lenders off from funding self-builds include complications with access to the proposed dwelling. “If it’s way down a shared lane and there are multiple other properties before you get to it, that can be a big problem for most lenders,” McDaid said.

“The other thing is lenders can be concerned if it’s right next to a working farmyard or family dwelling,” he added.

With the small number of lenders for self-build mortgages being easily put off, the key advice is to start making enquiries as early as possible.

There could be something small in your plans where a lender might say if you had adjusted that access point, then it would have been mortgageable. “With there being so few lenders in this market, you have to work with them. It’s not the other way around, McDaid warned.

Interest rates

When a lender is secured, one of the next considerations is what type of mortgage to go for.

Interest rates for fixed rate mortgages have recently started to move downwards, following rapid rises in 2022 and 2023.

“It depends on things like your deposit, employment and credit history, but there are fixed rates at the minute in the region of mid 4% to mid-5%, whereas a few months ago it was high 6%,” McDaid said.

Interest rates for longer-term fixed rate deals are currently lower than shorter-term fixes, which indicates that the market currently expects interest rates to fall further over the coming years.

For that reason, shorter-term deals are proving more popular at present, even though it means slightly higher monthly payments.

McDaid said tracker mortgages, which usually move in line with the Bank of England’s base rate, have become appealing to some home-owners recently due to interest rates moving downwards.

“You are not tied down at all with a tracker, so once rates come down a few more times then you might consider taking a fixed rate at that point,” he said.