Could you get on the property ladder for less?
The housing market is booming. A combination of pent-up demand from lockdown, the Chancellor’s stamp duty holiday and increased interest in out-of-town properties has pushed prices up to a four-year high according to the latest figures from the RICS. This is great news for existing homeowners but makes it even harder for first time buyers to take the first step on the housing ladder.
So Housing Secretary Robert Jenrick’s new model for shared ownership may be cause for celebration. The revamped homebuying initiative reduces the minimum initial share purchased in a property from 25% to 10%, and people will now be able to buy additional shares in 1% increments. The fees for doing so – known as ‘staircasing’ payments - have also been heavily reduced.
This means that people can buy a home with a lower deposit and should also lead to lower combined rent and mortgage costs. In fact a family buying a £200,000 property that previously had to provide £50,000 as a minimum stake will now only have to stump up £20,000. Still a lot of money to find but considerably less than under the old scheme.
The Government estimates that around 300,000 new households may now be able to buy a shared ownership home as a result of the changes. And even better for residents, their landlord will have to pay for any repairs needed to their homes for the first 10 years that they live in a shared ownership property.
The Government says the new model will “bridge the gap” between renting and homeownership because it will make it easier and cheaper for people to buy more of their home over time. But as with most great offers, this one comes with a caveat. Housing associations have done the maths and some are complaining the financials don’t add up. They don’t think the new scheme will work for them and they are questioning whether they can continue to offer shared ownership in future.
But whether or not you are interested in shared ownership there may be more good news for first-time buyers around the corner. Housing experts don’t think the boom we are seeing at the moment is sustainable. Some commentators think we could see prices levelling off or even falling by the end of the year as furlough ends and unemployment starts to increase. So our advice is to do your homework and find the locations that work best for you, compare available mortgage deals - and keep saving. The stamp duty holiday comes to an end in March so the balancing act for first -time buyers will be to wait and see whether prices start to fall without missing out on the chance to save on SDT.
Author : Maryanne Bowring