With such a saving, perhaps borrowers could purchase a bigger proportion of the property.
Paul Lewis is national development manager at Mansfield Building Society
You might say that the shared ownership market received something of an unexpected boost from last year’s Budget - one that was both surprising and welcome, and it’s not often you can say that.
In a Budget announcement that was not particularly heavy on housing market-related measures, there was one attempt to right something of a wrong when it came to first-time buyers purchasing shared ownership homes. Shared ownership purchases now benefit from the stamp duty relief introduced in 2018.
Philip Hammond took this opportunity to introduce the measure for first-time shared ownership buyers in both England and Northern Ireland (there is no change for buyers in Scotland and Wales), meaning they now pay no stamp duty on the first £300,000 of any home that costs up to £500,000. For properties bought over £300,000, the buyer pays 5% on the portion of the purchase price above it, up until £500,000.
It was clearly a welcome boost for both first-time buyers and the shared ownership market because the measure was not only applied at the Budget, it was also applied retrospectively, meaning those who had bought under a shared ownership scheme from the 22November 2017 are able to claim back the stamp duty they paid and secure a refund on exactly the same terms.
Of course, you get the impression that this was a simple oversight on the part of the Treasury back when the initial stamp changes were announced for first-timer buyers a year and a half ago, but let’s be honest, there was no huge outcry about its initial omission and I suspect it would have been quite easy for the government not to address the disparity. The fact that those did buy 12 months prior to last November will receive that stamp duty monies back, is a real positive and a move that I’m sure will be welcomed by many considering purchasing through shared ownership schemes and those that have bought recently.
The announcement has highlighted the very real opportunity that shared ownership currently offers. The first-time buyer market tends to be dominated by the Bank of Mum and Dad, guarantor products, high LTV mortgages, or indeed the Help to Buy scheme, so shared ownership can sometimes be overlooked but it is clearly an option for many people who cannot yet afford to buy the property outright via ‘conventional’ means.
As a society, we’ve offered mortgages in this space for some time and believe that, as we move forward, shared ownership is likely to become an option for more and more buyers seeking a means to get on the property ladder. We’ve always believed there is a real need to be flexible for borrowers in the shared ownership space, because their circumstances can change once they’ve bought a share in the property.
This might mean they can purchase a larger share quite quickly - remember some schemes allow borrowers to buy as little as 25% - and that’s why with our discounted rate product we do not apply an early repayment charge, allowing borrowers to move to a different product (perhaps a fixed rate) at any point with no exit charge for doing so.
That borrowers can use the drop lock loan for purchase, remortgage or staircasing (to an increased share of the property), provides a level of flexibility, particularly in the current economic environment. Plus our maximum loan size is £300,000, which happens to be the level at which stamp duty becomes payable for first-timers, meaning that anyone buying a shared ownership property for the first time will not have to pay that particular tax.
The stamp duty relief is a deserved boost for shared ownership as a viable means to secure a foot on the housing ladder. Indeed, with such a saving, perhaps borrowers could purchase a bigger proportion of the property and, together with flexible lending options, hopefully progress towards outright ownership sooner rather than later.
