As part of a package of measures aimed at helping more young people and those on low incomes become homeowners, housing secretary Robert Jenrick revealed a shake-up of the shared ownership scheme, which allows buyers to purchase part of a property and rent the rest.
Under the scheme, as it is now, people can increase the share of the property in increments of 10% – a process known as ‘staircasing’.
However, Jenrick said this could cost as much as £45,000 at a time. As such, he revealed, the Government would look at creating a new model for shared ownership to enable those using the scheme to buy their home in 1% portions instead.
Help to Buy
At the same time the Government also announced homeowners buying a property using Help to Buy would be given new freedoms which would make it easier to take out a 35-year mortgage.
Currently, many purchasers are limited by a loophole which means they can face difficulties if they want to take out a mortgage for a term of longer than 25 years.
However, under the changes, which take place with immediate effect, they can extend the term and therefore spread their borrowing over a longer period. This will reduce their monthly repayments.
Esther McVey MP, housing minister said: “We are determined to open up the dream of homeownership to the next generation and our Help to Buy schemes have already been used more than 500,000 times by families to get a leg up onto the property ladder.
“I want our Help to Buy scheme to work for homeowners so we are giving people the freedom and flexibility to take out longer mortgages, if it suits their needs.”
Will German, director of Help to Buy at Homes England, explained how, under the new policy, if the customers’ remortgage ran for longer than the standard 25-year Help to Buy: Equity Loan term, then it would automatically extend its term.
“This move opens up the Help to Buy remortgage market to more lenders. It offers more choice, more options and better outcomes for these customers,” he said.
Shared ownership
Ishaan Malhi, CEO and founder of Trussle, said it was great to see Robert Jenrick’s proposal to introduce a new model for Shared Ownership.
But he thought the Government must ensure that the new initiative was financially beneficial for mortgage borrowers.
“It’s important to remember that there are extra costs involved with remortgaging to purchase additional shares of a Shared Ownership property, known as staircasing. Waiting to buy a larger share in the property, as opposed to buying in 1% chunks, could avoid paying more in fees than necessary.”
He added: “Those considering staircasing on their Shared Ownership property, should speak to a broker to ensure they remortgage at the most suitable time. It’s important to consider any personal and future circumstances when securing a mortgage, and to seek advice so you’re aware of the available options.”
