Recent changes to the Shared Ownership initiative include the reduction of the minimum share from 25 per cent to 10 per cent, possibly giving those who saved enough for the Help to Buy scheme another route to purchase.
So, this week, Mortgage Solutions is asking: ‘Do you think the shared ownership changes will be an effective alternative for those who benefitted from or preferred the Help to Buy scheme?’
I don’t think the changes affect that; I don’t think the two are linked.
Help to Buy and shared ownership have always sat comfortably alongside each other and served different purposes, but I don’t think the changes have been geared up to affect that.
They don’t do enough to make any difference.
Shared ownership and Help to Buy are for different people. If you qualify for shared ownership you wouldn’t be able to buy a Help to Buy and if you can afford a Help to Buy you shouldn’t be looking at shared ownership.
There’s a small crossover but overall, it’s two different purchasers.
It can serve Help to Buy people, but it will only be towards the higher end of purchases.
The differences between the two is shared ownership goes through much more rigorous testing. The affordability checks that are done mean that shared ownership is tailored to each individual purchaser. Whereas Help to Buy has always been a builder-led scheme if you can afford it.
Generally, shared ownership might be able to pick up where Help to Buy has left off especially if there is a natural rise in the market. But it will mostly help cash purchasers.
If we don’t specifically focus on the changes, then it can step up and fill the gap in some way.
Rupi Hunjan, CEO and founder of Censeo Financial
Shared ownership has been around for a while; Help to Buy came in after the credit crunch to help builders and the government underpinned the scheme.
People who come into Help to Buy typically aren’t in the affordability bracket but those in shared ownership are.
On an equal position, if they can’t afford Help to Buy and put down five per cent, the salary multiples won’t work so they could to go for a shared ownership instead.
The changes to allow a lower share would invite more people into the shared ownership tenure. Whether or not it works is yet to, be seen. The devil is in the details.
We need to know how many people would be able to put in a lower share because the housing association could very well ask for more otherwise it won’t work for them commercially.
But with the changes to Help to Buy coming in in March, those looking at Help to Buy will begin looking at shared ownership which to be fair, they are already doing.
My worry is whether purchasing a 10 per cent share in a property work would for a developer or housing association to make it a viable scheme, especially in London.
However, depending on the grant subsidy the government offers developers, it might be possible. We’ll have to wait for the details.
Anything that helps more people to own their own homes is a positive.
Shared Ownership is definitely rising up the agenda for us, and we’re dealing with a lot of first-time buyers who are looking at this as a way to get onto the ladder.
I don’t really see this as an alternative to Help to Buy as the two schemes are targeting different types of buyers. This will work for those on low incomes, but shared ownership is not the same as full ownership and this is what people using Help to Buy want.
The restrictions on Help to Buy that are due to come into effect next year will affect people further up the income scale, and they will not for the most part be looking at shared ownership as an alternative.
Reducing the minimum stake to 10 per cent will encourage a lot of people, who may otherwise have thought home ownership was beyond their reach, to think about taking that first step. Cutting the deposit they need by more than half will clearly make this much more affordable.
But reducing the minimum stake is only one piece of the jigsaw. They will still need mortgage finance, so lenders also need to step up and make the right products available to support shared ownership.
It’s important also to remember that a smaller initial stake means the ongoing rental payments will be larger.
Borrowers need to be sure they can afford the combined rent and mortgage payments, and also to be clear about where the responsibility for maintenance and repairs lies.