One lender approached Mortgage Introducer claiming it was concerned by the volume of shared equity business it was seeing coming from developers and it was suspicious over whether the developers were in fact taking on the share.
The lender was looking at the sector very carefully to see how it would progress.
Stewart Hunter, head of intermediary business at Astra Mortgages, admitted that it too had areas of concern with shared equity and would be adjusting its business volumes accordingly.
He believed that market conditions could be the driver behind the rise in shared equity applications from developers.
He said: “If the trading situation becomes more uncertain developers can guarantee a revenue stream through holding an equity share in the property. This way, in quiet years, developers get income from people buying out the mortgage or when they move.”
Last week, Mortgage Introducer reported that Accord Mortgages had withdrawn its shared equity products after concerns with the sector.
It too had noticed a massive growth in enquiries from developers and had worries over the level of exposure it was taking on through new build properties; although it mentioned nothing concerning application suitability.
Neil Johnson, head of PR and policy at the Building Societies Association, believed the complexities of shared equity products meant that the potential for fraudulent behaviour was more likely than regular mortgages.
Robin Gordon-Walker, spokesperson for the Financial Services Authority, said: “If borrowers are stating there is another party holding part of the mortgage when there isn’t really, it is a version of overstating income. All parties in the property transaction need to be alert to the potential for falsified applications.
The House Builders Federation said that as long as everything was transparent, there should not be a problem with shared equity and if lenders did have any concerns they should contact the developers.
