The government's proposed reforms to the Right to Buy scheme are sending ripples through the sector
The government’s consultation on reforms to the Right to Buy scheme is making waves in the housing market, with potential changes to discounts and replacement housing stock drawing mixed reactions. For mortgage brokers, these reforms could herald significant challenges and opportunities, as Ryan Joyce (pictured), an experienced broker, told Mortgage Introducer.
“I personally think it might be harder to get a mortgage just simply because, if there's less discount, quite often the lenders allow those discounts to be used as the deposit so they may be more reluctant to offer these types of mortgages,” he said.
Joyce also pointed out that a reduction in discounts could shake the foundation of the scheme.
“Some lenders actually want the buyers to put their own deposit as well as the discount in,” he added. “So I’ve got a feeling that less discount means less deposit, and that might start putting some lenders off. They might say, we haven't actually got as much security when a house is worth £100,000 and you’re getting 50% off that – that’s a lot of security for lender. However, if that starts being reduced, I think we'll see lenders think twice about what they're going to do - in that if there's less lenders offering that sort of proposition then you're going to be forming a niche [for yourself].”
‘We see shared ownership in a similar sort of environment’
These shifts, Joyce noted, might transform Right to Buy into a personalised offering, with parallels to shared ownership schemes where fewer lenders mean higher interest rates.
“We see shared ownership in a similar sort of environment, where those interest rates are always that little bit higher because it’s not as many lenders doing it,” he said. “And that's what I think we, as brokers, need to be aware of when we have those chats with clients.”
Shared ownership is definitely gaining traction in the current competitive market. According to data from GOV.UK, in the 2021-2022 financial year, there were 19,386 new shared ownership properties delivered in England, marking a 14% increase compared to 2020-2021 and the highest recorded number since data collection began in 2014-2015. What’s more, 76% of shared ownership purchases in 2021-2022 were made by first-time buyers, with over 69% of all purchases by individuals under the age of 40, and 35% under the age of 30.
For brokers, however, navigating this tricky terrain requires a proactive and pragmatic approach.
“First of all, I think we need to be available for those people that want to get things done quickly,” Joyce emphasised. The urgency to finalise purchases before reforms take effect could lead to a rush of activity, demanding brokers’ expertise in identifying efficient conveyancers and lenders.
“I think we’ve got to be keeping a very, very close eye on what these changes are going to do,” he said. “As well as understanding which lenders are going to be available to get that over the line in time. Longer term, I think we've got to be keeping watch on what these changes are going to do - not just understand the new scheme or reform happening, but understand how it will impact lenders. We need to keep up to date in terms of what is going to happen in the mortgage market.”
Again, this hands-on approach means that if issues do arise down the line, brokers already have a solution in hand.
“If we're going to have those problems around that deposit…then we need to be feeding that back to lenders so that hopefully they can produce products that naturally fit into the new reforms,” added Joyce.
One critical area where brokers can make an impact here is self-education.
“I see so many people that have said, ‘We’ve put this off for five, six years because we just didn’t think we were going to be eligible’,” Joyce recounted. “Social media is going to play a huge, huge part in getting that information and that education piece across. There’s going to be a lot of people in the situation where, even if it's older tenants for example, they'll have grandkids or kids that are on social media that can feed this back – and help them understand that this is doable.”
‘The education piece has always been a big problem around Right to Buy’
Yet, the challenge extends beyond digital outreach – for Joyce, it’s about being available and being present. After all, if that data is to be believed, while customers tend to trust AI in some respects helping with the process, it’s no substitute for the human touch.
“The education piece has always been a big problem around Right to Buy,” he said. “Come and have a chat with us. It costs absolutely nothing. We can actually give you some proper information rather than hearsay. If, by the end of it, you’re not eligible, or it doesn’t quite work for you that’s fine, at least you know.”
The potential for reduced transactions under the reformed scheme raises broader concerns about its viability, as Joyce warned that lenders might deem the market unprofitable.
‘We’re starting to see the fallout of Help to Buy now’
“There might not be as much profit anymore. There might be too much red tape for them to get around to offer new products,” he noted. “Do the interest rates then go up, and that might affect how mortgages look in this space? Lenders are a lot more open to having feedback from brokers now than they’ve ever been. It’s constantly banging the drum as a collective,” suggesting that brokers push for new government initiatives to replace dwindling schemes like Help to Buy.
And, reflecting on the government’s approach, Joyce criticised the lack of industry consultation.
“We’re starting to see the fallout of [Help to Buy] now,” he remarked, noting that earlier input from brokers might have mitigated some of its unintended consequences. For Right to Buy, he advocated a controlled reform process. “I can imagine that most brokers at the time could have foreseen that, in which case having that input from industry representatives [would have been key]. They could have said: ‘Look, this is going to be a problem’. Because it is now a problem.
“It’s all good reducing the deposit, but if interest rates are going to go up…there’s going to be a scheme there that nobody can access effectively.”
Despite the challenges, Joyce remained optimistic about brokers’ ability to guide clients through uncertainty.
“There’s a lot of misinformation that happens all the time in mortgages,” he said. And with reforms still under consultation, his advice was simple: “Just come out and chat with us brokers, and we can actually give you some actual information and actual facts.”
