Around 4.5 million, equivalent to 61%, of all private and social renters have low expectations of becoming home owners, according to the report from housing investment and shared equity mortgage provider, Castle Trust.
Its analysis of the latest Office of National Statistics English Housing Survey shows that three million social renters and 1.5 million private renters don’t believe they will ever buy a home. Indeed of those that do envisage buying a home, around 1.5 million, think it will be five years or more before they will look to buy.
Castle Trust’s analysis also showed that owner occupation in England has decreased by 200,000 from 14.6 million in 2008 to 14.4 million in 2012. However the number of private renters in England in 2012 increased to 3.8 million, an increase of 23% from the 2008 figure of 3.1 million.
For many, owning a home does not appear viable. With the number of renters on the increase and owner occupation falling, Castle Trust believes that the development of innovative mortgage products is crucial in creating a competitive sector that provides increased choice of mortgage options for potential home buyers.
‘Many people are either unable to get on the property ladder or stuck in their current home despite interest rates still being at an all time low. Schemes like the government’s Funding for Lending are helping to boost borrowing options but the market still needs innovative lending products,’ said Sean Oldfield, chief executive officer at Castle Trust.
Around 2.8 million owner occupiers in England have lived in their current home for over 30 years suggesting they have not traded down on retirement to free up equity in their home. Moreover the median tenure for owner occupiers has risen from 11 to 13 years since 2008/2009.
‘The risk of rising mortgage rates is a major issue for home owners with their finances already under pressure. Shared equity can play a major role in reducing risks, including the risk of going into arrears, by cutting monthly mortgage commitments,’ explained Oldfield.
Castle Trust offers a new type of shared equity, called Partnership Mortgages, which enables home owners under the age of 55 to issue equity in their home, as well as investment products, called HouSAs, which enable savers to invest efficiently in the national housing market, tax free if through their SIPP or ISA.
Partnership Mortgages are for 20% of the value of an owner occupied home alongside a repayment mortgage of up to 60% from a traditional lender and a deposit or equity of at least 20%. There are no monthly commitments on the Partnership Mortgage and Castle Trust shares 40% of any profit made by the homeowner when they sell or come to the end of the mortgage term. The company also shares 20% of any loss made on a home bought with a Partnership Mortgage.
Castle Trust says that its HouSAs are suitable for ISAs, Junior ISAs and SIPPs. Its Income and Growth HouSAs can be taken out for terms of three, five or ten years. The Income HouSA tracks any rise or fall in the Halifax House Price Index and also pays an annual income of between 2% and 3%, depending on the investor’s chosen term.
The Growth HouSA offers a multiple of between 1.25 times and 1.7 times any increase in the Halifax House Price Index and limits the loss to between 0.75 times and 0.3 times any decline. Both HouSAs are available for investments of between £1,000 and £1 million.
