Shared ownership remains the only means of buying for some would-be home owners. Many lenders continue to recognise this, and the social responsibility that comes with it, but the question remains – how is it performing?
This is a big question and one which the Council of Mortgage Lenders (CML) has recently zeroed in on. Within its database, the trade body identified more than 60,000 shared ownership mortgages advanced since 2006, with around 40,000 of these still live on lenders’ books.
Some initial observations about the profile of shared ownership borrowers and mortgages suggested that:
- First-time buyers in southern England are more likely to opt for shared ownership than those in other parts of the country;
- Shared ownership borrowers stretch their purchasing power and buy higher valued properties than other first-time buyers, even allowing for a different regional mix;
- Like other first-time buyers, shared ownership borrowers are increasingly opting for repayment terms of longer than 25 years. In 2016, six out of 10 shared ownership first-time buyers chose to repay over a term of longer than 25 years;
- Fixed-rate mortgages are popular among shared ownership borrowers, and more so than for first-time buyers overall. Of shared ownership mortgages that are still live on lenders’ books, just over half are still on a fixed rate, while others will have reverted to lenders’ variable rates.
So how can intermediaries utilise this information?
Shared ownership is often classed as a specialist area of the purchase market due to complexity surrounding product availability, criteria and future proofing borrowing requirements. Improvements have been made though.
Lenders have expanded their understanding of this sector to help simplify matters for borrowers and intermediary partners. Good working relationships have also been developed between many lenders and housing associations and there is a decent appetite to lend.
Recently announced changes to eligibility for shared ownership are likely to increase demand, although it’s also been said that competing first-time buyer products (in particular equity loans and starter homes, as currently proposed) may work to divert some of that demand to other products.
Maximise improved relations
For those intermediaries looking to stand out in the market this offers the chance to recognise where these improved relations are, and capitalise on them. Establishing a wider knowledge base to encompass all these schemes and initiatives could prove fruitful in identifying new business, and being in a position to market themselves to meet this growing demand.
This may work better in certain regions but is something worth considering, especially for those operating in the south of England.
Good all-round awareness of this sector shouldn’t be underestimated and is a necessity for the intermediary community as a whole.
However, demonstrating real expertise could secure more deals for clients taking their vital first step onto the property ladder and help convert them from a first-time buyer into a client for life.