New Help to Buy and Shared Ownership schemes for First Time Buyers due in April

 

With changes to both the Help to Buy and Shared Ownership schemes due to come into force at the beginning of April 2021, it’s vital that you remain fully up to speed on how you may be affected by these impending changes.

The latest figures from the Ministry of Housing, Communities & Local Government outlined that a total of 291,903 properties were bought between 1 April 2013 and 30 September 2020 using the Help to Buy equity scheme. The data also showed that 82% of all completions were by first-time buyers. The total value of the equity loans was £17.4bn and the value of the properties sold under the scheme equated to £79.2bn. In addition, between 1 July and 30 September 2020, 13,211 properties were bought with an equity loan.

So, how does the new scheme differ from the old one?

The new Help to Buy scheme, running until 2023, will be restricted to first-time buyers and will operate with regional price caps in place (maximum property price in London £600k and South East £437,600 for example).

You can borrow a minimum of 5% and up to a maximum of 20% (40% in London) of the full purchase price of a new-build home.  You do not pay interest on the equity loan for the first 5 years (interest starts in year 6 on the equity loan amount you borrowed). The equity loan, the deposit you have saved, and your repayment mortgage cover the total cost of buying your newly built home.

Help to Buy is not an all in-compassing solution but it can prove to be a viable option for a variety of first-time buyers, even for those who may have had a credit blip in the past.

Meanwhile, the new Shared Ownership scheme will allow buyers to purchase a minimum share of 10% compared to 25% previously, and will permit staircasing in instalments of 1%, rather than 5% or 10% currently.

In addition, a new 10-year period will be introduced for maintenance and repairs, whereby the landlord or housing association will be required to cover costs rather than homeowners.

Due to the complexity of both schemes, it is vital to seek good, impartial, independent, and professional advice before entering into any agreements.

Shared Ownership popular outside of London

Help to Buy has benefited from an increased profile in recent times (probably due to the impending closure date!) and this has helped more FTBs recognise its attributes – which is a good thing - although it’s prudent to point out that it should not be considered an all in-compassing solution.  And, on the flip side, despite this rise in lending prominence there are still pockets within the market where it can prove valuable for a certain type of borrower which often goes overlooked.

I believe this type of product is seen by most borrowers, as being one which sits squarely in the domain of mainstream or high-street lenders. Meaning the role of specialist lenders can often go ignored, which is a shame. There are specialist lenders who can provide Help to Buy solutions for borrowers with an adverse credit history, IVA’s or even bankruptcy issues, and this is an important part of the scheme which we tend to hear very little noise around (T&Cs obviously apply!). 

The other area we are seeing increased enquiries from, especially more locally with the amount of building works taking place, is Shared Ownership.

Shared Ownership Schemes are normally provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

According to research by the Leeds Building Society, this is rising in popularity outside of London.  The report suggests that the South West has seen the greatest rise in the use of shared ownership between 2009 and 2018.  This was followed by the East Midlands and the West Midlands.  London saw the largest decline, falling from 34% to 13% over the same period.

The specialists might not be applicable for everyone, and still form a small proportion of the overall lending figures, but they should be playing a bigger role in supporting more complex or low credit scoring borrowers get a foot on the property ladder for the first time or even back onto it after falling off.

Bank of Mum & Dad now 10th largest lender in the UK!

First Time Buyers trying to get on the property ladder will turn to the Bank of Mum and Dad to borrow more than £6.3bn this year, according to a report from Legal & General.  This equates to  being the equivalent of the country's tenth biggest mortgage lender!

The average parental contribution for homebuyers this year is £24,100, according to L&G.  This is up by more than £6,000 compared to last year.

The report also suggested that thousands of UK buyers were reliant on their parents to either get onto the housing ladder in the first place, or upgrade to a larger home.  Almost a fifth of those who said they had, or would help a family member buy a home, said it was because they felt it was their personal responsibility to help out.

The financial services firm also warned that parents' generosity could hurt their standard of living in retirement.

First Time Buyers currently have a good number of options available to them, including mortgages up to 95% of the property value and where possible, parental guarantor mortgages.   This includes ‘Joint Borrower, Sole Proprietor’ arrangements.

We've also seen a marked increase recently in enquiries for Right to Buy properties and those looking to purchase on a Shared Ownership basis:

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price.  This discount can be substantial, and applicants must have been a public sector tenant for at least three years.  Some lenders will allow borrowing of up to 100% of the purchase price.  If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period. 

Shared Ownership Schemes are normally provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, even those who may have had financial credit blips in the past.  So, always seek advice.

The Bank of Mum and Dad is huge!

First Time Buyers trying to get on the property ladder will turn to the Bank of Mum and Dad to borrow more than £6.5bn this year, according to a report from Legal & General.  This equates to nearly 25% of UK property transactions and similar to being the country's ninth biggest mortgage lender!

The report suggests that the 'millennials' are the biggest recipients with 70% of the funding going to people under the age of 30.   

Although, a report from Prudential has also suggested that Mum and Dad worry about how their money is being spent and would like control over the gifted funds.  One in four worry it could be given to their children's spouses in the case of divorce and one third are mindful their children could squander the gift altogether!

First Time Buyers currently have a good number of options available to them, including mortgages up to 95% of the property value and where possible, parental guarantor mortgages. 

We've also seen a marked increase recently in enquiries for Right to Buy properties and those looking to purchase on a Shared Ownership basis:

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price.  This discount can be up to £78,600 (£104,900 in London)  and applicants must have been a public sector tenant for at least three years.  Some lenders will allow borrowing of up to 100% of the purchase price.  If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period.  There are other schemes available to housing associations and the Government has plans to extend Right to Buy to more housing association tenants.

Shared Ownership Schemes are normally provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, even those who may have had financial credit blips in the past.  So always seek advice.

Right to Buy or Shared ownership?

Over the last few weeks, we’ve seen a marked increase in enquiries for Right to Buy properties and those looking to purchase on a Shared Ownership basis.

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price.  This discount can be up to £77,900 (£103,900 in London) and applicants must have been a public sector tenant for at least three years.  Some lenders will allow borrowing of up to 100% of the purchase price.  If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period.  There are other schemes available to housing associations and the Government has plans to extend Right to Buy to more housing association tenants.  So if you think you are eligible, register on the Government's website.

Shared Ownership Schemes are normally provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, even those who may have had financial credit blips in the past.  So always seek advice.

Finally, first time buyers generally are in the spotlight again with many great rates and low fee products available.  One in particular, launched over the last few weeks, will allow customers to achieve, subject to an affordability assessment and minimum income levels, a loan equivalent to six times their income.  Yes SIX!  With a 15% deposit required and a competitive rate of interest, this product is an exclusive from the Tipton & Coseley Building Society.  Obviously terms and conditions apply.  There still needs to be a lot more innovation in helping the First Time Buyer sector overall, but huge credit to those trying to assist in the current climates.

So, what's in store for 2017?

A Happy New Year to you all! 

In the last 12 months, we've seen many new lenders launch in to the mortgage market in addition to the current batch fighting for business by offering low and attractive rates with freebies including valuations, free legals and even cash backs.

I see 2017 offering a lot more to First Time Buyers including more products aimed at those with smaller deposits.  Shared Ownership opportunities and Right to Buy mortgages will also increase as local authorities push schemes to help get people on the property ladder.

The easy business for the high street lenders is for Home movers and those looking to Remortgage. Simple and straight forward, with some of the best rates available and subject to clients credit scores, these should be all computer decision based.

                                 

Without doubt, the most in-demand side will be the more specialist Buy to Lets, Houses of Multiple Occupation, Holiday Lets, Student Lets, basically whatever will bring in the best return for investment.  Despite the Prudential Regulation Authority introducing new rules, and considerable tax changes being implemented over the next three years, this will still be a huge part of the market as returns on savings remain low and people look for other ways to invest and make money. 

But of course as volumes increase, those with credit issues, or adverse may be turned away by the high street.  More and more lenders are launching ways to help this sector.  Nearly anything is acceptable from missed mortgage payments, to bankruptcy, to debt management plans, to payday loans.  Strict terms and conditions apply, but seek specialist advice as these can now go right up to 90% of the property value.

And let's not forget the over 65s.  Lending in to later life is a huge part of the market and more and more lenders are offering products to this age bracket.  Some with unlimited age restrictions.  As long as the loan to value is good and affordability fits, why can't anyone have a mortgage?!

Carpool Karaoke.....for mortgages!

The world has gone Carpool Karaoke crazy!  Celebrity James Corden has had a number of top celebrities, including Adele and Michelle Obama, in his passenger seat to sing along to an array of hits.  In celebration of our 25th anniversary, the AToM team have filmed a rendition of the Madness classic ‘Our House’ and this is available for your viewing pleasure on our Facebook page (www.facebook.com/atommortgages).  Hope you enjoy it, as much as we did filming it!! 

In other news this week, a number of new products have been launched as lenders have a big push to finish the year on a high.

Our good friends at Precise Mortgages have launched a Right to Buy range for those eligible to buy their rented property at a discounted price from their council or housing association.  Allowing up to 100% of the purchase price, this is a great offering from the lender as it also allows an element of credit issues, with some defaults and CCJs accepted (Terms apply).

Investment Properties, Buy to Lets, usually have the mortgage loan available calculated based on the rental generated by the property.  Usually this is calculated at 145% of the mortgage on a nominal rate of 5.25%.   However, new lender, Foundation Homeloans, has launched a 5 year fixed rate at 3.45% and can calculate the loan based on this rate and 125%, if buying in a limited company.  It changes to 145% if in a personal name.

Finally, a number of lenders have reduced rates for customers looking to buy a new build property.  Whether it be a house or flat, lenders will assist assuming it has the right building guarantees and will even consider if the builder has an incentive offer, such as contribution towards deposits or stamp duty.  Some of the new build properties around the area are also eligible for Shared Ownership.  This involves the purchase of a smaller share of the property, whilst renting the remainder.  Normally there is an option to purchase the remaining share at a later date.  Explore all the options available to you. 

Helping First Time Buyers..

First time buyers have been given a huge helping hand this week with the launch of a new 100% mortgage scheme. This works using the process of a legal charge being registered against immediate parental property, effectively using the equity as a guarantee. However, the key point here is that the applicant’s income must be sufficient to cover the whole of the mortgage on their own. Up to 80% of the value of the mortgage is charged to the applicants property and the remaining amount is charged against the parents property. The charge on the parental property, plus any existing mortgage, should not exceed 75% of the total borrowing on that property. What this means is that, for those with good income, supportive and accommodating parents yet little or no deposit, a property purchase is eminently possible enabling clients to get a foot on the property ladder. Good to see such product innovation!

The Government recently announced an increased availability to council tenants enabling more of them to purchase their own properties and this has resulted in a large number of enquiries for Right to Buy mortgages. Right to Buys often result from a local council selling the subject property to an existing tenant and at a discounted price. This discount can be up to £75k (£100k in London) and tenants must have been with the council for five years or more to obtain the maximum discount level. Some lenders will allow borrowing of up to 100% of the discounted sale price, and possibly slightly more if the extra funds are to be used purely for home improvements. If you re-sell your home within five years you will usually have to repay some, or all, of the discount you received. However, re-mortgaging is usually allowed during this time period. This is covered under the term 'Pre-emption Clause'

The other big hitter for first time buyers is through Shared Ownership Schemes, normally provided through designated housing associations. You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association. You usually have the opportunity to purchase a bigger share of the property later on (known as ‘staircasing’). Local housing associations must confirm your eligibility in order to join these types of schemes.

These schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of differing customer types, so always seek advice.  Especially as some of these lenders may not be household names.  But that shouldn't deter you as their volumes are hugely on the increase and they are great lenders to deal with.

SWAP rates decrease, delays still wide spread and Shared Ownership in demand.

We've seen a large increase in enquiries for customers looking at Shared Ownership schemes.  Shared Ownership schemes are provided in conjunction with housing associations. You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association. You usually have the opportunity to purchase a bigger share of the property later on (known as ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.  There are many schemes available and a good supply of properties, so do review all the options available.   By buying a smaller share, it does give an opportunity to obtain a property for many who may struggle otherwise with normal lending criteria.  

Delays are still wide spread across the market.  An existing customer phoned their lenders mortgage sales team and was advised that they could not have a discussion about a new mortgage for over two weeks!  Another customer requested a homebuyers valuation on their property (more investigative than a standard mortgage valuation) and although the surveyor could carry out the normal mortgage valuation within days, the enhanced homebuyers report could not be carried out for a month!!  You need to be aware of these delays as many property sales are sold subject to contract and this normally carries a 28 day exchange period. 

Finally, we have seen some surprising product interest rate decreases over the last few days.  SWAP rates (the mechanism through which lenders can acquire a fixed price for funding over a specific period of time) have reduced over the last week or so, and as such some lenders have passed on the reduction through their interest rate offerings.   This is great going in to the holiday period and should encourage anyone considering reviewing mortgage options in the not too distant future, to maybe consider it sooner as these may not remain low for too long.  Always seek advice! 

Dudley launch - AToM one of the chosen few!

The summer is over, the kids are back to school and the post holiday credit card statements are on their way!  Ok, so a bit negative, but don’t panic when they arrive.  Debt Management Plans and Payday loans look like an attractive solution and they will be right for some people. However, most mortgage lenders are not favourable to these arrangements.  If you are looking to change your mortgage, think twice before committing to such a plan. Consolidating debts into one monthly payment via a secured loan or even a total remortgage may be a better option. Obviously securing short term debt in to a longer term loan will inevitably increase the amount of interest paid and professional advice should be sought before going this route.  But do review your options as rates are low.

The Dudley Building Society has launched their new mortgage lending proposition through seven key mortgage packager/distributors around the country.  We’re delighted that AToM is one of the chosen few!  The Dudley BS specialise in assisting First Time Buyers, Shared Ownership (90% of share on New Build properties), Right to Buys, Buy to Lets and more.   It’s great to see lenders expanding their propositions in to new areas and we look forward to working with them.

Buy to Let mortgages seem to be the flavour of the month.  With the rental market remaining buoyant and showing no signs of declining, lenders are reacting to the huge demand for investment/buy to let properties.  This sector has also experienced the recent mortgage price war and some big criteria changes as lenders seek to attract more of this business type.  Buy to Let properties will often provide a modest monthly return over and above the mortgage payment.  The additional amount can be used to supplement income, or, with flexible mortgages, can be used to “overpay” the mortgage and reduce the term.   Most lenders in this sector will require the rental income to exceed the mortgage payment by up to 125%.  Remember that, whatever the deal, lender terms and conditions will always apply and there are no guarantees of continued rental or capital growth.

August was a superb month for AToM.  Completion numbers, those taking out mortgage loans, were the best for five years!  Thank you to all those who have been using AToM’s services, we really do appreciate it.

Right to Buy or Shared Ownership?

It’s been a very busy week in the mortgage market.  Lots of rate volatility as lenders long term fixed rates begin to creep up, along with many delays across the market as lenders struggle to cope with rising volumes as people snap up great rates before they increase!  Unfortunately, it also means that some funding levels are being fully utilised and one such example is with our good friends at the Saffron Building Society who have shut their doors temporarily for this exact reason.  They follow a number of lenders who temporarily suspended lending in early August.  But we hope to see them return in the autumn with a great new range of products for 2014.

Many lenders are looking for niches in the market and two such examples are Right to Buys and Shared Ownership schemes.

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price. This discount can be up to £75k and tenants must have been with the council for five years or more. Some lenders will allow borrowing of up to 100% and possibly slightly more if the extra funds are to be used purely for home improvements. If you resell your home within five years you will usually have to repay some, or all, of the discount you received, however remortgaging is usually allowed in this time period. This is covered under the term Pre-emption Clause.

Shared Ownership Schemes are provided through housing associations. You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association. You usually have the opportunity to purchase a bigger share of the property later on (known as ‘staircasing’). Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, so always seek advice.  Especially as some of these lenders are not household names.  This should not deter you though as these lenders have a good funding arm and an appetite to lend!

Right to Buy and Shared Ownership enquiries on the increase

Over the last few weeks, we’ve seen a marked increase in enquiries for both Right to Buy properties and those looking to purchase on a Shared Ownership basis.

Right to Buys are usually via the local council selling their properties to the existing tenant at a discounted price.  This discount can be up to £75k and tenants must have been with the council for five years or more.  Some lenders will allow borrowing of up to 100% and possibly slightly more if the extra funds are to be used purely for home improvements.  If you resell your home within five years you will usually have to repay some or all of the discount you received, however remortgaging is usually allowed in this time period.

Shared Ownership Schemes are provided through housing associations.  You buy a share of your home, between 25% and 75% of the property value, and pay rent on the remaining share to the housing association.  You usually have the opportunity to purchase a bigger share of the property later on (normally called ‘staircasing’).  Local housing associations must confirm your eligibility in order to join these types of schemes.

Both schemes are proving popular in the local area and a wide number of lenders are looking to lend in both scenarios and to a number of different customer types, so always seek advice.

Whilst mentioning advice, there are a lot of good rates in the market currently.  Some of these are only accessible through certain brokers.  Make sure you are speaking to someone who has access to the Whole of Market and access to these superb rates as they can be withdrawn with little or no notice.  With this in mind and as mentioned in a previous write up, some lenders will launch market leading products but only for a short period, in order to attract volume business.  The latest to do this is Accord mortgages (owned by Yorkshire Bank).  Sadly by the time this goes to print, this particular set of fantastic products will be gone as they were only available for 7 days, so I will not go in to detail, but they were good and there are likely to be more soon.  Remember, despite what some say, you do not have to take your mortgage with any one source even if they insist that is the deal.  Shop around and make sure you are getting the right deal for number one!

Looking at 'Right to Buy / Acquire' or Shared Ownership?

We are seeing a large increase in enquiries from those looking to purchase the property they live in at a discounted price, as offered to them by the local council or housing association.  Termed as ‘Right to Buy’ or RTB, usually the minimum period to live in the property to obtain a discount is five years and the discount from the open market value of the property could be as much as £75,000! But note, the five years as a council tenant does not necessarily have to be in a row, and may possibly be different addresses.  Terms and conditions apply!  Lenders will look to assist those looking at RTB purchases and some offer mortgages with minimal, or no deposit required.   For those who may have had a historic issue with their finances, again, there are lenders who will assist, but they are likely to require a deposit of up to 25% of the discounted purchase price.

Right to Acquire is another term we are seeing used more lately.  Usually the customer living in the property is eligible for a discount varying from £9,000 to £16,000, depending on where they live.   As with RTB, there are lenders who will assist, but they are a little more limited in number for this type of scheme. 

Another option is called Shared Ownership.  As the name suggests, the purchase of a property is shared with another party, usually a Housing Association.  First time buyers, if eligible, can purchase a percentage of a property (between 25% and 75%) and a Housing Association purchases the remainder.  The buyer then pays rent on the latter percentage, in addition to their mortgage payments, with the option to purchase an increased share of the property later on. There are many schemes available and a good supply of properties, so do review all the options available.

Finally, the Nationwide House Price Index suggests that house prices rose by 0.2% in February and the typical UK house price average now stands at £162,638. 

Active lenders are not just a household name or brand!

I might even be bold enough to start this week’s column by saying the market has turned a huge corner and is on a substantial climb out of the doldrums!  Wow, what a week it has been.  Competition is rife amongst all lenders, from well known high street names; right through to lenders you’ve never heard of; to those funding commercial mortgages; to those specialising in secured second charges; to those looking at investment properties / buy to lets and to those who offer mortgages for complex scenarios that need a little thinking about, outside of the box.

Rates are reducing all across the market and headline grabbers are now sub 2% for a two year fixed and around 2.7% for a five year fixed.  T&Cs apply obviously, but watch out for the fees.  They range from £1,500 to £1,999 and although the rates are great, they might not be the best in the market, if priced over the term period.  For example, a slightly higher rate, with lower fee and free remortgage package (free valuation and solicitors) might work out more cost effective over the same period.   Always review the APR, the rate your mortgage reverts to after the promotional period and always seek professional advice. 

Active lenders are not just those with a household name or brand.  Many smaller funders / lenders located in various parts of the country have money to lend, and at good rates, if you know where to find them.  So don’t be drawn to a lender just because you know their brand.

With this in mind, figures released recently suggest that lending via Building Societies rose 30% in 2012 with net lending of £6.5bn.  And it’s not just for those with a large deposit as almost half of the sectors lending was against 75% of the property value and above.  In addition, Building Societies are more flexible than banks and can manually assess cases, taking a view of the whole scenario rather than a tick box decision.  First Time Buyers, Self Build, Shared Ownership, Home Movers, Buy to Let, Credit Repair and Let to Buys, are just some of the active areas for such institutions.