In the letter, prepared following discussion with industry and the Building Societies Association and to be sent to key players in the mortgage market, he says that he wants to see building your own house become much more common, to generate much needed supply of affordable and sustainable homes, and calls on them to make more specialist finance products available for self builders.
He says that few people realise that the self-build movement provides more homes than any individual housebuilder, but is still far smaller than in many other countries, and that he believes it could double in size over the next decade.
Lenders often shy away from the self build lending market due to the higher perceived exposure to risk, but with typical interest rates on self build products at around six per cent, Mr.Shapps says that the self builder is an attractive prospective customer and with the self build market relatively undeveloped provided an opportunity for lenders to tap into a new market.
And he says that lenders should not be put off by self build development as that in reality the majority of self build projects are not "DIY builds" but involve professional builders, architects and project managers.
He encourages lenders to make more widespread use of indemnity insurance and 'build out' cover to mitigate the risks of self build projects not being finished.
He also cited experience from one specialist self build intermediary which indicates that of the 15,000 funded self-build projects started over the past decade, less than 50 have been repossessed.
The UK has one of the smallest proportions of self builders in Europe - today's letter comes as part of the Government's ambitious work programme to encourage growth in the self build sector. He said that whilst Government would play its part, the future growth of the sector depends on lenders themselves backing the country's aspiring builders.
Earlier this year, Mr.Shapps launched a new Industry-Government working group - led by the National Self-Build Association - to generate ideas on how to reduce the barriers faced by prospective builders, including the burden of regulation and the lack of access to land and development finance, which for too long, Mr.Shapps argues, have thwarted the aspirations of people who want to build their own home.
Housing Minister Grant Shapps will say:
"Self builders deliver affordable, greener and more innovatively-designed homes; and make a big contribution to the number of new homes built in this country, yet there is scope to significantly increase the number of self built homes in the UK - both for individual households and for community-driven projects.
"I want to create a self build revolution where building your own home is not just the preserve of the privileged few and as the mortgage market continues its recovery, lenders have ideal opportunity to diversity lending into areas such as this. With expert knowledge from established intermediaries lenders can make a profit at low risk.
"I think there are real business opportunities for lenders here - as the market grows - and I call on them to help make this important housing sector more mainstream."
As well as proving much needed new housing, there are significant associated benefits to the economy with a stronger self build sector, such as creating local employment opportunities for building professionals, contractors and other property professionals, and helping individuals acquire new skills.
The Government is leading the way by reducing the burden of regulation on the house building industry and putting power in the hands of communities up and down the country, enabling them to give the green light to new developments through the Community Right to Build, and by identifying appropriate opportunities for self-builders when public sector sites are marketed.
Raymond Connor, Chief Executive of BuildStore Financial Services, said:
"Compared to the wider housing market, demand for self build finance is continuing to grow, so we would like to see more lenders respond to the self build market, and offer more practical products in order to serve the sector appropriately.
"The self build market offers high quality lending, and with our development of systems and products which reduce lender's exposure to risk, this presents a great opportunity to provide funding in a growing market, currently worth £2bn annually.
"As well as enabling more people to build the homes they want and need, funding the self build sector also helps to boost local economies and supports the construction supply chain."
Martin Bell, Head of customer lending at Norwich and Peterborough Building Society, said:
"N&P is proud to offer self build mortgages and support those who choose to go down the self build route.
"Building your own home could make perfect financial sense for very many people, and we welcome Grants Shapps' promotion of the self build sector, highlighting the possibilities that are out there.
"While many may think a self build project is beyond them, it is likely to be much cheaper than buying an existing property and the satisfaction of living in a home that you have seen built from scratch is difficult to match. We are more than happy to talk people through the options available."
David Lownds, Head of Marketing at the Hanley Economic Building Society, said:
"Hanley Economic Building Society has proudly supported Self Build initiatives for the last 3 years.
"We recognise that there is a need for growth in the self build sector and have demonstrated our commitment to the Self Build proposition
