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Your Complete Guide to MMC Mortgages

Posted 5 June 2018 by Helen Christie

MMC homes will play a key role in tackling housing shortages in the UK. Here’s your complete guide to MMC mortgages...

Innovation in the new build housing market is one of the ways that the government hopes to meet its new homes target.

Modern methods of building now take the construction of a property away from a building site to a factory, and these ‘modern methods of construction’ (MMC) are set to play a key role in the supply of new homes.

But what are MMC homes? How do they differ from standard construction? And how do you can a mortgage on a MMC property? Keep reading for answers to these questions and more.

What does MMC stand for?

MMC, or ‘modern methods of construction’ is a term given to non-traditional ways of building new homes.

MMC typically involves fabricating the structural units of a building off site, or manufacturing them on site by contemporary methods.

In a survey of 250 housebuilders by the Build Show, 67% said that MMC will play a key role in new-home supply in the UK. Almost two thirds of housebuilders believe that manufacturer innovation will play a key role in new home supply.

The Guardian reports that in Finland, more than half the population lives in houses built in factories and bolted together on site. Around 20% of German homes and 14% of Japanese homes are also built off site.

Why is MMC important?

It is hoped that MMC can help to tackle the housing shortage in the UK. The government has set a target of 300,000 new homes a year, and helping to simplify and speed up the construction process is a key way of helping to reach this target.

Moving more of the production process to a factory saves time and reduces the amount of labour required on site. A report by the National Audit Office, Using modern methods of construction to build homes more quickly and efficiently, found that MMC could reduce construction time by more than a half. They also enable up to four times as many homes to be built with the same on-site labour.

There are lots of other benefits of MMC. For example, its use of automation can help to address the skills shortage the construction sector is experiencing.

“Modern methods focus on taking construction processes away from the building site,” says David Gall, associate director, construction product certification at BRE Global. “The advantages of a factory-based process are the controlled conditions, which can be significant given the vagaries and unpredictability of the UK’s weather.”

Modern methods of construction also contribute to an improvement in health and safety. Andy Miller, technical risk control manager at Allianz, says: “Factories are much safer, controlled environments than building sites. Construction sites can be unpredictable places, so less time spent there helps to reduce the risk of accidents.”

Is MMC the same as ‘prefab’?

Back in the 1940s, thousands of prefabricated homes (known as ‘prefab’) were built. Perceptions of prefab properties are poor, with people generally seeing them as low-quality homes that are cheap and badly designed.

However, the quality and durability of prefabricated homes has increased significantly over the years. The quality of materials used and the build process are totally different to the prefab homes of the past, and it seems as if some of the negative views of prefab homes are being overcome.

The National Audit Office report, Using modern methods of construction to build homes more quickly and efficiently, found that building performance could be at least as good with these methods. David Gall from BRE Global adds: “Offsite construction allows for quality control and consistency checks so the snagging process is minimised.”  

Is it harder to get a mortgage on a MMC property?

While perceptions of MMC homes are improving, the ‘prefab’ element still raises concerns with lenders. Concerns that building standards can’t be guaranteed is one of the problems that lenders face when looking at offering mortgages on MMC properties.

Douglas Cochrane, head of housing development at Lloyds Banking Group, says: “Our concern is still around the legacy problems from the last rush to build, when prefabricated properties came to the market… and these properties are now unmortgageable. So, what we’re asking for is some form of accreditation so that there’s some comfort in these properties.”

At present, it is more difficult to get a mortgage on a MMC property than it is to secure a loan on a traditional build. However, there are lenders who are prepared to consider applications, as we see next.

How do you get a MMC mortgage?

While MMC mortgages are not widely available, there are lenders who will consider applications on these types of home.

For example, the Ipswich Building Society now accepts modern methods of construction (MMC). The mutual offers loans to new borrowers and those looking to remortgage, offering deals from across the Society’s existing range of mortgage products.

To borrow on a MMC home with the Society, the applicants’ chosen scheme must be accredited through the Buildoffsite Property Assurance Scheme (BOPAS). This initiative has been 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. Richard Norrington, CEO at Ipswich Building Society, says: “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.”

If you’re looking for a mortgage on a MMC property then it can pay to approach a building society.

A report from the Building Societies Association says: “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.”


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