Taking part in a panel discussion at the Mortgage Solutions British New Homes Mortgage Senate, Rob Barnard, intermediary relationship director at Pepper Money, said shared ownership fits well with the specialist lending market, and the specialist lender had spent a lot of time championing it.
However, he said some things needed to be challenged within the scheme, such as the common ‘no adverse credit’ policy, which saw housing associations “shy away” from some borrowers.
Barnard said half of Pepper Money’s shared ownership borrowers had no adverse credit, and its criteria were “significantly tighter” than its mainstream criteria.
He added that the income caps on shared ownership were “historic[al]”, as they were set in 2016 and have not been changed since.
Barnard added: “We’re not looking to lend to massive earners, we just want those income caps to be challenged. Do they need to rise in line with inflation?”
He said he recently came across a couple who each earned around £43,000, giving them a total household income of £86,000. As they were renting and unable to raise a deposit, Barnard said shared ownership would have been “beautiful” for them, but they could not use the scheme because they breached the £80,000 household income cap.
Barnard said there also needed to be more data shared about the profiles of shared owners, as this could give peace of mind to developers and housing associations.
Niki Willacott, new-build business development manager at Principality Building Society, said the scheme needed to be streamlined, as there were multiple versions of it, with options for 80% or 100% staircasing and 10% or 25% minimum share requirements.
She said the Help to Buy scheme’s success was partially due to its simplicity.
Willacott added that there was a lot of focus on getting people onto the property ladder, but not enough on staircasing.
“It’s been around for 40 years; there’s probably a lot of people that possibly only still own 25% or 50% of their house and possibly don’t realise they could own 100%,” she added.
She said this could need government intervention, adding: “[Shared ownership] has been around for a long time, but it could do so much more.”
The panel moderator said from a commercial point of view, it was challenging for brokers to advise on shared ownership unless they did this in large volumes, because although some lenders paid a higher proc fee, borrowers took out smaller loans.
She asked how lenders could encourage brokers to do more of this business.
Willacott said: “There are so many people out there that they could be helping to get on the property ladder. There just needs to be more education, we just need to talk about it more.”
Jonathan Evans, national account lead at Skipton Building Society, said the industry could amend the incentives offered for shared ownership, such as encouraging micro-staircasing, allowing borrowers to buy smaller shares of between 1% and 5%, which could be done through monthly overpayments, and free legals that cover the full additional legal work required to make it worthwhile for the buyer.
Andrew Calder, strategic partnerships and propositions manager at Accord Mortgages, said shared ownership was meant to be a starting point, but not enough people staircased to own larger shares or fully own their home, as it was too expensive.
More innovation needed
When the panel discussion turned to product innovation, Evans said Skipton had already done this with its Track Record and Delayed Start products, as had Accord with its £5k Deposit deal.
He added that because larger banks held a 65% share of the market, it would be good to see more innovative products from them.
Calder said the sector was starting to see steps towards personalised pricing for those with credit blips and more low-deposit options, which was adding confidence to the market.
Barnard said there was good innovation, but the market had to “be careful what we wish for”, adding: “If you look at the debacle that followed the fiscal statement in September 2022, I think the only thing that stopped us spiralling out of control was [that] arrears didn’t spike. And I think arrears probably didn’t spike because of the 4.5 times income cap. So, I think we just have to be a little bit careful of what we wish for.
“What we’ve got from a specialist perspective is we can say innovation is already there in the specialist space, but we have to raise awareness of it… with consumers. Because I don’t think consumers know what’s available to them.”
He said this could be done through the mainstream press.
Evans said even where innovative products were available, they were often underused. However, he said demand could still be created if customers spoke to advisers and learned more about options.
Willacott said this could be aided by more government support.
