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‘Restricted’ range of shared ownership lenders must change ‒ analysis

  • 20/09/2019
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‘Restricted’ range of shared ownership lenders must change ‒ analysis
Brokers have warned that having only a handful of lenders to choose from on shared ownership is leaving borrowers under-served.


The concern was raised as part of Shared Ownership Week, a campaign to raise awareness of the scheme that runs to 25 September.

Shared ownership is expected to be the chief beneficiary of the withdrawal of Help to Buy, while there may be work to do in ensuring that buyers are aware of how it could help them.


More affordable choice

Jane King, mortgage adviser at Ash Ridge Private Finance, said that given it has been running for decades “it still amazes me how few buyers know about shared ownership.”

However, with Help to Buy being phased out, she suggested shared owners “will garner more publicity, especially with regards to resales ‒ many people believe you can only purchase new properties”.

King emphasised that shared ownership has strengths over Help to Buy even in the current market, depending on where a purchaser is looking to buy. 

In some parts of the country such as London and the South East, Help to Buy was not much use as affordability was still an issue and so shared ownership was the more affordable choice,” she said.


Varied levels of understanding

David Hollingworth, director at L&C, pointed to “a varied range of understanding,” over how shared ownership works, which depends on whether buyers have had much dealing with the housing association. 

He added that this is where brokers have to take on an educational role in explaining how the mortgage works. 

“Some may assume all deals are on offer whereas others may think that they can only use deals specifically tailored to shared ownership,” Hollingworth said.

Dilpreet Bhagrath (pictured), customer experience manager at Trussle, said that it was important for brokers to have in-depth conversations with borrowers about shared ownership and what it entails, because “customers won’t always understand the ins and outs of a government scheme”.


Restricted range

King said that there were still “only a handful of lenders” active in the market, though she welcomed that large lenders such as Virgin Money had spotted the opportunity.

The lack of choice is unhelpful, though, with “current borrowers restricted to a few large lenders and handful of smaller mutual building societies”. 

Hollingworth suggested the number of lenders “is broad enough to give a good range of options,” though he admitted surprise at how many were not active in shared ownership.

Bhagrath argued it would “be great to see more lenders in the market,” particularly if they addressed under-served groups such as those with adverse credit histories.

“The government and industry need to work together to make home ownership more accessible,” she said.

“Developing innovative solutions and mortgage products to help under-served groups in the mortgage market is crucial to making this happen.”


Support for staircasing 

Brokers anticipated that the withdrawal of Help to Buy would boost shared ownership.

As Help to Buy is phased out, certainly there could be even greater emphasis placed on shared ownership as a way for stretched first-time buyers to step onto the ladder and to hopefully use it as a springboard to full ownership in years to come,” Hollingworth said.

The government’s attempts “to inject more flexibility into staircasing,” showed that it was seen as an important part of the housing mix.

“How that will feed through in practical terms will have to be seen of course,” he added.

Bhagrath urged government to ensure that staircasing changes were financially beneficial for borrowers.

It’s important to remember that there are extra costs involved with remortgaging to purchase additional shares of a shared ownership property.

“Waiting to buy a larger share in the property, as opposed to buying in one per cent chunks, could avoid paying more in fees,” she added.


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