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What you need to know about shared ownership

by: Halifax Intermediaries
  • 18/01/2020
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Poised to be the ‘go-to’ affordable housing scheme after Help to Buy, the only way is up for shared ownership mortgage lending


Shared ownership schemes have been around for more than 40 years and there are currently over 200,000 shared ownership homes in the UK.

However, in recent years, the government’s flagship affordability initiative – Help to Buy – has stolen the limelight, relegating shared ownership to the shadows.

But not for much longer, as Help to Buy is currently scheduled to end in 2023.

Shared ownership has the potential to be a profitable and growing business stream, so brokers need to get up to speed with developments in the sector.


Set for substantial growth

According to the Savills Spotlight on Shared Ownership report, there were more than 13,400 completions in 2018, and Rightmove listed 2,500 second-hand shared ownership properties for sale in Q4 2018, up 69 per cent on Q4 2010.

And it’s set to grow even more sharply.

Shared ownership is already being lined up as the affordable housing scheme of choice after 2023, with Savills predicting an increase in demand for these homes of over 15,000 a year.

That is because, once the government-backed Help to Buy scheme is no longer available, shared ownership will be one of few routes onto the ladder for many aspiring homeowners.

If your clients have neither a significant deposit nor access to the Bank of Mum and Dad, what other options might they have?

The political will and funding to build more affordable homes is also apparent, with a £9.1bn government commitment in place, plus a further £3bn in funding support guaranteed for housing associations in the 2019 Spring Statement.




In October, the government announced it wants to introduce a new national model for shared ownership – called Right to Shared Ownership.

Tenants moving into new homes will be given the chance to buy a share with a stake of just 10 per cent of the total property value, a cut from the current scheme which requires buyers to purchase at least 25 per cent.

In some areas, this will mean people can get on the housing ladder with deposits as low as £2,000.

People will also be able to buy their home in one per cent chunks – rather than 10 per cent at a time. Britain’s housing market may still be broken, but efforts are being made to fix it.


Evolving mortgage market

The shared ownership mortgage market is also growing as lenders have recognised increased demand.

According to Moneyfacts, the number of lenders offering products through shared ownership schemes has risen to 26 from 2009 to 2019.

Over half of these lenders are building societies, although there are major banks in the market now too, as well as specialist providers.

There are key differences in lending criteria so make sure you understand exactly what’s on offer. For example, shared ownership lending is sometimes restricted to certain postcodes, regions or even developments.

Also, consider any restrictions or limits on what can be borrowed in the future, as well as initially.

If your client plans to staircase in the early years of homeownership, that should be taken into account in terms of the most suitable mortgage and the lender’s criteria on purchasing further shares.

Halifax offers shared ownership mortgages up to 90 per cent LTV of the total share purchased, for example.




Beyond traditional shared ownership

Be aware of similar affordable housing initiatives that could help your clients, such as Resale Price Covenants (RPCs).

Some of these may still be managed by a registered provider, such as a housing association or local authority.

In these arrangements, the council will grant planning permission for a scheme but insists the developer provides a certain level of affordable housing, such as selling a proportion of the properties at a discount.

These sales will be subject to a covenant, with the condition that the owner has to keep the same discount in place when they come to sell, although the seller can benefit from any increase in their equity.

Resale price covenants are different to shared ownership schemes because the buyer generally cannot staircase to own the whole property – but neither do they have to pay market rent on the portion they don’t own.

The growth in RPCs on new housing developments has led some mortgage lenders to adapt their criteria, but not all will support a purchase subject to a resale price covenant.

Halifax offers mortgages on this type of affordable housing arrangement and, as they become more prevalent, brokers need to be aware of how they work and which lenders will fund these purchases.

Keep up to date with the affordable housing sector. It’s likely to rapidly develop as the end of Help to Buy looms, and you can be ready to help your clients find new solutions.



For the use of mortgage intermediaries and other professionals only

If you do not have professional experience, you should not rely on the information contained in this communication. If you are a professional and you reproduce any part of the information contained in this communication, to be used with or to advise retail clients, you must ensure it conforms to the Financial Conduct Authority’s advising and selling rules. Halifax is a division of Bank of Scotland plc.

Registered in Scotland No. SC327000. Registered Office: The Mound, Edinburgh EH1 1YZ. Bank of Scotland plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 169628. This information is correct as of November 2019 and is relevant to Halifax products and services only.



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