How many years will it be before shared equity becomes a mainstream staple, instead of a niche?
Examining the issue in this week’s Market Watch are:
Andrew Frankish, director new homes, Mortgage Advice Bureau
For years affordable housing was stigmatised by lenders and mortgage advisers who preferred to focus on the ‘mainstream’ market. But we are now seeing much more interest in schemes aimed at helping first-time buyers and this is a clear sign that this is now being taken more seriously.
A lack of income or deposit is the fundamental problem for thousands looking to buy their first home. Shared equity and shared ownership are two extremely valuable schemes for first-time buyers.
Both are designed to assist those who cannot afford to buy outright, and if you look at the profile of first-time buyers and potential first-time buyers at the moment, even many professionals can’t afford to buy without support – whether they’re lucky enough to receive money from their families, or whether they take out a shared ownership or shared equity scheme.
So will these schemes become more mainstream?
Yes, definitely. But how quickly depends on the market. The demand is there so we just need to respond to it. The key is how fast the profile and understanding of these products develops among first-time buyers.
Lenders have started making positive noises, but we still need more to become involved as this will create more competition, which is good for prices and product innovation.
Alan Gravett head of sales & marketing, Teachers Building Society
Shared ownership has long been supported at Teachers Building Society and we have been providing mortgages for the government’s equity loan scheme since 2009.
While shared ownership is the ideal solution for some aspiring first-time buyers, we are currently seeing more interest in the equity loan scheme.
FirstBuy, which provides buyers with the opportunity to own 100% of their home from the outset – has a more appealing starting point for many first-time buyers.
Affordable home ownership schemes are bound to be vital while the cost of living continues to rise and the economy remains fragile as many would-be home owners could manage monthly mortgage payments but are just not able to save up a sizeable deposit.
Such schemes are, in some cases, the only way forward for people in that position.
We expect that equity loan, shared ownership and the new indemnity guarantee schemes like LAMS (Local Authority Mortgage Scheme) will play an increasingly important role in the provision of affordable home ownership over the next few years.
With only limited government funding available, it is reasonable to predict that private sponsorship of affordable housing initiatives will increase and that such schemes will become more mainstream sooner rather than later.
David Hollingworth associate director communications, London & Country Mortgages
The current market looks just the kind of environment that should favour affordable home ownership schemes, including shared ownership and shared equity. In an environment where large deposits are required with a backdrop of rising rents, nothing gets easier for first-time buyers.
There has long been debate over whether the balance of home ownership will at some stage shift in part toward rental. That transition is likely to take time and the intervening period could see an increase in shared ownership, as buyers look for alternatives that provide an affordable option.
It also offers the security of tenure that an assured short hold tenancy cannot match. That desire to have some control over their residence, rather than be subject to the changing plans of their landlord is a fundamental driver for many aspiring buyers.
Shared equity also looks set to become a standard feature of the market and carries the additional potential of including open market property, especially as new offerings such as Castle Trust come to market.
I would expect there is room for both these structures to gain a better foothold over the next ten years, especially as initiatives such as The Housing Hub look to improve scheme co-ordination. However, full ownership will still take some shifting as first preference in the short term.