A problem shared is a problem halved – is shared ownership the answer for first-time buyers?
Over the past couple of decades rising house prices have meant a need for larger deposits. In 1960, the average first-time buyer paid an average deposit of £595 on their first home (equivalent to around £12,738), whereas in 2018, this had jumped to £20,622[1]. With people needing to save more money to move home it’s no surprise that this has contributed to an increase in the average age of a first-time buyer. For example, in December 2018 the average was 30 whereas in December 2019, just a year later, this had increased to 32[2].
With many struggling to get on the property ladder, shared ownership provides an option to help prospective first-time buyers.
Generally with lower deposits needed, shared ownership properties are commonly more accessible than standard mortgages, and more secure than private renting.
Schemes like this offer an alternative route onto the property ladder, giving buyers the chance to find a place they can call home, at an affordable price.
Shared ownership – Things to consider
The Government has sought to ease the problem for first-time buyers, through the removal of stamp duty and the introduction of the Help to Buy scheme – which is due to end in 2023.
The industry has also sought to provide innovative solutions to tackle the core problem of deposit-constrained buyers through the provision of shared ownership mortgages. For some reason though, shared ownership seems less well known, and it shouldn’t be.
Shared ownership cases aren’t always straightforward, and not all lenders support this type of mortgage. The complexity of the case, the expertise required, and the ongoing relationship with housing associations, all mean that many mainstream lenders struggle to support lending in this space. It’s vital therefore for brokers to know which specialist lenders they can turn to for flexible criteria and the support they need.
Brokers need to:
- Consider whether there are restrictions on how much a buyer can borrow from a particular lender. Also whether your client would like to increase the share they own in the future, or if another specialist lender has criteria more suited to the client’s circumstances. And if a buyer plans on purchasing more of the property, what percentage do they wish to purchase and at what LTV? Also, how much would obtaining a further advance cost? These aspects could all affect the rates they’re offered.
- Explain concepts in much more detail, such as staircasing (buying additional portions of the property), rental costs as well as mortgage costs to help borrowers make informed decisions.
- Detail the relationship between the housing association and shared ownership homes and what this means for prospective buyers when they come to sell their home. It’s worth noting that different housing associations across England and Wales have different rules.
Kent Reliance for Intermediaries is one of around 20 other lenders supporting shared ownership schemes. With a plethora of experience in this area and an understanding of the demands that prospective first-time buyers of today encounter, we could offer you and your clients support when they need it most. While applicants may be turned away due to insignificant deposit levels, we have a 0% deposit option to support these applications. And with the ability to consider furlough income as part of their shared ownership application, it could be a step in the right direction for your client. For further information, get in contact with your local senior BDM who can provide more information.
[1] https://www.independent.co.uk/property/first-time-buyer-age-increases-1960s-housing-market-cost-property-ladder-a8244501.html
