This relatively narrow lending band which sits around mainstream borrowing is an interesting one. I described shared ownership as “a specialist area of the purchase market due to complexity surrounding product availability, criteria and future proofing borrowing requirements.”
And this is a summery which can also be applicable to another lending solutions within this band – intergenerational lending.
At this juncture I should also point out that this specialist tag does not mean these are products to avoid or that they should not come under consideration for your average client. What it does mean is they require more in-depth product knowledge about how they can be best used to match the ever-changing demands of borrowers and the access they have to some degree of financial support.
With an added layer of complexity running through the current lending arena it’s clear that lenders need to simplify all types of offerings where possible, and help educate borrowers and intermediaries on their benefits. After all, forms of lending which may have been classed as alternative in times gone by are increasingly becoming the norm.
For example, recent figures from the Social Mobility Commission suggested that the proportion of first-time buyers relying on the Bank of Mum and Dad has grown significantly.
The research outlined that over a third of wannabe homeowners in England (34%) now turn to family for a financial gift or loan to help them get a foot on the housing ladder compared to one in five (20%) seven years ago. It also found that 12% of existing owners benefit from a gift or a loan when buying a new home and that first-time buyers who receive money or a loan from their parents can buy 2.6 years earlier than those who do not.
In London, this figure rises to 4.6 years earlier.
Parallels to shared ownership are again evident, in terms of there being more ways to tap into this type of lending than just through first-time buyers. The modern mortgage market dictates that buyers, and their family members, are demanding more innovation to help achieve their borrowing, lending and support needs.
A fact which also serves to highlight the importance of good, professional advice.
Despite a raft of information available at borrowers’ fingertips, those considering shared ownership schemes and intergenerational lending options often tend to require more hand holding throughout the process.
Demonstrating the ability to provide this additional support can prove to be a key factor in establishing a strong client relationship from the outset, which could well lead to a raft of ancillary business over the longer term. And, with affordability a continued concern among all types of borrowers, it’s little wonder that demand is growing for a range of more specialist solutions to assist them in the homebuying process.