It is a sad reality that even though 86% of Britons would like to own their own home, many are finding themselves stuck in ‘Generation Rent.’ Shared ownership schemes, however, offer a viable way for many of these aspirational first-time buyers to move on from what can seem like an endless circle of renting.
With this flexible model, buyers are able to part own and part rent a property, enabling them to take their first step onto the property ladder. But what does this mean for brokers? And how can they best help their clients?
Shared ownership is set to shake up the mortgage market. The government aims to help one million people into home ownership through government backed initiatives by 2020, with the hope of building 135,000 new shared ownership homes by 2021. With these developments in place, and as more education is given on the subject, these schemes are well on their way to becoming part of the mainstream mortgage market.
As such, brokers must be aware of all the options available to potential borrowers, including shared ownership, in order to provide tailored advice that meets their clients’ individual requirements. This is especially true for first-time buyers; it is important that advisers are aware that shared ownership is not only a realistic and viable option for this group, but that it could also help to mobilise the UK’s stagnant housing market if used effectively.
Distinguishing differences
As house prices continue their seemingly unstoppable rise, it is concerning to see that many ‘general practitioner’ brokers do not currently offer shared ownership initiatives as an alternative option to clients. The problem is that many brokers are struggling to distinguish between shared equity and shared ownership. It is important to resolve this misunderstanding as soon as possible, so that clients can benefit from shared ownership and brokers can open the door to new business opportunities.
This year marks some significant changes for the scheme. Income caps have been raised, meaning that families earning up to £90,000 in London and £80,000 elsewhere in the country could be eligible for shared ownership. Alongside these developments, more and more lenders are now looking to expand into this area of the housing market as well.
Digital Mortgages by Atom Bank is just one of many lending brands who have expressed their interest in this market. The new lender will launch this year and has confirmed that it will have relevant products for clients looking at shared ownership at the point of the launch.
A missed opportunity?
The idea behind shared ownership is to enhance social mobility in the country by opening up the UK’s ultra-competitive housing market. Brokers have a key role to play here, in part by helping to combat the stigma typically associated with this form of lending, which normally stems from a lack of understanding.
It is therefore concerning to see that many brokers are overlooking shared ownership as an option and potentially missing out on a client for life. After all, brokers not only risk losing the mortgage business, but also the associated protection and general insurance sales.
Further along the road, a client that has participated in shared ownership may look to extend their share or purchase their own home outright. A happy customer is likely to go back to the adviser that introduced them to the scheme and helped them to take their first steps onto the housing ladder. As a result, a knowledgeable and trusted adviser is likely to keep hold of this business.
At Legal & General Mortgage Club, we are doing a lot of work to support the growth of shared ownership. By focussing on this vital area, we hope to see an improved lending proposition for this sector, and expect to see a number of new lenders participating in the scheme during 2017.
