Brokers discuss the ins and outs of shared ownership
Affordability has tightened for many potential borrowers in recent years due to the wider economic climate.
So, what alternative options are brokers advising their clients to consider? Mortgage Introducer reached out for a closer look at one of them - the shared ownership scheme.
Ellis Shepherd (pictured), business owner at All About Mortgages, said, in an ideal world, everyone would be able to purchase the entirety of a property.
However, he added that as prices have changed so drastically even in the last 10 years, purchasing a home has become a lot more difficult.
“Loan-to-income ratios, borrowing caps, and other affordability restrictions have been brought in to abide by responsible lending standards, which is a good thing, but it has hindered people looking to get on the ladder, especially in London and the south east of England,” he said.
Why choose the shared ownership scheme?
Scott Taylor-Barr, financial adviser at Barnsdale Financial Management, said while shared ownership has been around for a while now, it always plays second fiddle to more well-publicised schemes, such as Help-To-Buy.
“With products available that let you purchase with no deposit, or just 5% of the share you are buying, shared ownership helps mitigate one of the largest barriers for first-time buyers - saving a deposit,” he said.
Taylor-Barr added that an individual can then grow their share of the property over time by staircasing.
However, he did concede it is not all ‘blue sky and sunshine’, as an individual has to follow the rules laid down by the housing association and remember that the property is jointly owned.
“However, as a way to start your property ownership journey, it is worth considering and can certainly help more people than it does currently,” he added.
How to get more from shared ownership?
While Shepherd believes the shared ownership scheme is a good option for customers struggling with affordability, he believes it needs to be expanded and supported more by the government.
“I believe the government need to focus additional funding into the shared ownership scheme, which will allow housing associations to continue providing more and more good quality homes,” he said.
Shepherd added that there is the potential to ramp up the shared ownership scheme, but he believes it will need careful planning and good infrastructure, as well as investment for it to reach its full potential.
Lee Gathercole, co-founder at Rebus Financial Services, has been advising clients to consider the shared ownership scheme for many years, particularly first-time buyers or home movers, that have not got the borrowing capacity or the deposit to purchase a property in full.
Gathercole believes there will certainly be an increased demand for shared ownership properties going forward, as property values and mortgage borrowing costs runaway form first-time buyers.
“I personally think it is a fantastic scheme if used for the right person; it allows first-time buyers and home movers to purchase their home, and more importantly it allows them to step on the ladder affordably,” he said.
Charles Breen, founder and director at Montgomery Financial, agreed with Gathercole that the shared ownership scheme is a good way for people to get on to the property ladder, considering the high level of house prices and the stumbling block of a deposit.
“Thanks to shared ownership, their dream of owning a home can become a reality much sooner than they were expecting,” he said.
Shared ownership, he concluded, is a particularly useful tool in areas where house prices and rents have become a considerable challenge for potential buyers.
How do you believe shared ownership can be better used to support customers? Let us know in the comment section below.
