Does shared ownership have a place in the market?

Getting on to the housing ladder for many would-be first-time buyers is proving particularly difficult at present due to the wider economic outlook.

As such, many brokers are turning to schemes and initiatives to help their customers, with shared ownership among them.

Mortgage Introducer discussed the shared ownership scheme with brokers to gain a deeper insight into what works well, or less well, about the offering.

Shared ownership or marmite

Christian Duncan, managing director at Manchester Mortgage Centre, said, historically, shared ownership has been like marmite, people either love the idea or hate it.

“In recent years it has very much been a case of needs must; an example of this is as landlords look to sell properties due to the increase in mortgage interest rates and the lack of tax relief, we are seeing tenants become homeless,” he said.

In these cases, Duncan said shared ownership is welcomed by the majority, as it provides a much needed opportunity for those struggling. He added that the scheme represents the middle ground between owning a property and renting one.

“In my opinion, it is a great scheme and certainly has its place in the market; it would be nice to see more lenders open up to such schemes,” Duncan said.

Gary Bush, financial adviser at MortgageShop, has been advising clients on shared ownership property purchases and mortgages since 1992.

“I have found them a very useful device for getting more people on the property ladder,” Bush added.

However, the only reason that they have grown over the years, he said, is due to the change in site planning consents for builders in that they now must include an element of affordable housing in developments.

Bush believes the government needs to take another look at shared ownership and offer a lot more assistance, as well as update some of the “draconian” housing association lease conditions that are out there.

“On the whole, we find the scheme useful for clients who have a bedroom need that their budget cannot afford, often making it possible for larger properties to be budgeted for,” he said.

Shared ownership – pros and cons

Meanwhile, Luke Thompson (pictured), director at PAB Wealth Management, said while shared ownership has a place in the market, he believes it has to be for the right customer.

“Shared ownership is never the first option that I give to a customer, but if clients do not have a big enough deposit or sufficient income, I will suggest the scheme as a potential option,” he said.

However, Thompson said it is important to make customers aware of the downsides to the shared ownership scheme.

“Dependant on the share purchased, the rent can be very expensive and a lot of shared ownership housing associations now will not let you staircase to purchase the whole property,” Thompson said.

In turn, this reduces the number of lenders available to the customer, therefore restricting them in their aspirations.

The initial purpose of shared ownership was to allow borrowers to purchase a property that was financially out of reach, however, with restrictions on staircasing, Thompson believes the scheme risks becoming somewhat redundant.

In spite of this, Thompson said that, largely due to the financial outlook, more people are interested in shared ownership, however he added that it is difficult to find properties for sale as not enough are being built to keep up with demand.

Do you advise clients to consider the shared ownership scheme? Let us know in the comment section below.