Property buyers in the UK ignoring affordable housing schemes, research shows
Home buyers in the UK are missing opportunities by ignoring affordable housing schemes and shared ownership, it is claimed.
The potential for such schemes is overlooked by the majority of people and the differences between shared equity and shared ownership remain a mystery, according to a report from the Halifax. It also found that the appetite to learn more about available schemes is subdued.
Its report says that a lack of affordable housing is widely regarded as the key reason that prevents buyers from stepping onto the property ladder yet it seems that many homebuyers are in the dark as to the opportunity that shared ownership and shared equity schemes offer.
Nearly three quarters, 72%, of respondents said that they would not consider buying a house through a shared equity or ownership scheme, almost a fifth of whom believed that it would be too expensive to pay both a mortgage payment and rent monthly.
However, the reality is quite different. The Halifax gives as an example a two bedroom shared ownership property that costs £160,000. It says a 75% share would cost £120,000 with a deposit of 15% at £18,000. A mortgage £102,000 on a three year fixed rate of 5.79% would cost £652 per month on a repayment basis over 25 years. The rent would be £91.66 per month, giving a total monthly cost of £743.66
It says many borrowers will also be able to access mainstream mortgage rates meaning that they don’t have to choose from a reduced range of products or pay a premium.
The research also found that the location of a property is for most buyers a key driver behind the decision of whether that home is right for them. Some 68% don’t know about any affordable housing schemes in their area and 15% of those who were not interested in the schemes said that the area and type of property available via affordable housing schemes would put them off buying.
But four in ten of those who would consider the schemes said that buying a shared ownership or equity home would enable them to live in an area they couldn’t normally afford. These buyers, who are challenging the common misconception that affordable housing schemes are located in undesirable areas, are benefitting from buying in sought after new developments or in communities that already have a large portion of owner occupiers.
Nearly half, 44%, said that it would allow them to get onto the property ladder but nearly a third, 31%, of people don’t want to find out more about how to get onto the property ladder with the help of an affordable housing scheme and one in ten don’t know where to turn for help and advice.
‘Affordable housing provides a great leg up onto the property ladder and shouldn’t be overlooked. Many people don’t know where to turn to find out more about these schemes or wrongly believe that they aren’t eligible, but talking to a housing authority or developer is a good place to start. When it comes to looking for a mortgage, buyers could be surprised to hear that they can usually qualify for a mainstream deal,’ said Stephen Noakes, commercial director for mortgages.
‘For those who think they are priced out of the market we would encourage them to consider an affordable housing scheme. Once a portion of a home is purchased, most schemes will allow the owner to ‘staircase’, a process that enables them to slowly increase the amount of the home they own as and when they can afford it, providing valuable flexibility,’ he added.
