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Government pledges to make home ownership more affordable

The government has announced this week they are giving access to 35 year mortgages for Help to Buy homeowners, consulting on changes to shared ownership schemes and want to "build homes for locals".

affordable homeownership

This week the government announced plans that it hopes will help increase homeownership by making it more affordable.

The government consultation includes plans for a “national model of shared ownership”. This would include:

  • efforts to make it easier for shared ownership homeowners to get a mortgage
  • plans to make selling a shared ownership home easier
  • changes to how much people can “staircase” (i.e. buy up more shares in their home) by, allowing smaller percentages to be purchased – so just 1% a time rather than the current 10%
  • a 20% discount for local first time buyers in order to protect local communities.

The government has also announced it will be making it easier for people buying under the Help to Buy scheme to take out a mortgage that runs for 35 years – rather than the current 25.

Will these proposals make a difference?

Let’s take a look at each in turn.

A national model for shared ownership

Who can argue with the idea of a national standard for all shared ownership properties?

Shared ownership is a very complicated scheme that varies depending on the housing provider you use. Anything that simplifies it for buyers is good news in our book. Our guide on shared ownership covers just some of the pros and cons which need addressing.

The government suggest that a single preferred model for shared ownership for all housing providers, will enable lenders to provide more competitive mortgage finance.

Critics of these proposals have rightly pointed out that a new national standard for shared ownership needs to address the more significant issues around the tenure of what are largely leasehold properties. These come with service charges, repair costs and ground rent over which homeowners have no control.

Staircasing by 1% increments

As part of the national standard, the government are proposing to make staircasing more flexible by taking action to enable people to buy further shares at smaller increments (for example, of 1% or more).

The devil will be in the detail, but in theory, the idea of buying up 1% chunks of your home as and when you can afford to, in the same way you might pay extra off your mortgage as and when you can afford to, sounds like a good idea.

But the plans would only work if the government addresses the transaction fees that come when you staircase – from paying for an independent valuation survey, to legal and remortgaging fees. If these fees remained it would mean regularly buying up 1% shares in your property more expensive than buying a larger chunk.

For more on the common pitfalls at play, see our guide on staircasing your shared ownership.

More help for local first time buyers of shared ownership

The government consultation “Make homeownership affordable” also refers to wanting to support the delivery of more homes for local first time buyers. This already happens with homes provided for shared ownership at a  discount of at least 20% for locals, it says.

“I want local young people, whether growing up in Cornwall or Cumbria, to be able to stay in their communities and build a family where they feel at home,” wrote the Housing Secretary in the Times.

We can expect more details on these “homes for locals” soon.

Speeding up the sale of shared ownership

When you come to sell your shared ownership home, the landlord has exclusive rights for the first 8 weeks to try to find an eligible buyer (ie someone struggling to buy outright on the open market). The government points to how this delays the sale. They propose removing this pre-emption clause as a means of speeding things up.

35 year mortgage for Help to Buy

Alongside the consultation document, the government has also introduced a change that allows homeowners buying a property under Help to Buy to take out a 35-year mortgage. This change comes in immediately.

The move reflects change in the wider mortgage market, where the number of first-time buyers taking out a mortgage of more than 30 years has doubled in the last decade.

At present, when re-mortgaging after 2 or 5 years at the end of a fixed rate period, Help to Buy homeowners cannot in practice take out a mortgage that goes on for more than 25 years after the original property purchase date.

This policy change opens up the Help to Buy re-mortgage market for more lenders, giving customers more choice – potentially paving the way to more competitive deals.

A longer term mortgage is attractive in that it brings with it lower monthly repayments. They can offer buyers more flexibility in their monthly budget. And for some it could mean a very fundamental difference between being able to afford to buy and get out of rented.

But choosing a 35 year term means you will pay significantly more interest over the life of the mortgage than if you opted for a 25-year mortgage.

Tell us what you think of these proposals in the comment box below? Would they benefit you?


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6 Comments

  1. You are all far too optimistic, this is just another “help to sell” scheme so that BTL can cash out, leaving FTB’s holding the can. Perhaps you doubt my resolve to stay in the same bedroom of my childhood? Sometimes the best way to win is not to play.

    Comment by Rich — September 1, 2019 @ 4:26 pm

  2. I have had share ownership house since 1997 and am now within 6 years of state pension age. These measures have come too late for me. I need help with the maintenance of the property now which is entirely my responsibility. Yet if I was to fall behind in rent or not maintain it per contract I will lose my share. The scheme is weighted too far in favour of the housing association.

    Comment by catherine Hutton — August 29, 2019 @ 9:59 pm

  3. What happened to the pledge on stamp duty?

    Comment by Alan Lloyd — August 29, 2019 @ 9:41 pm

  4. I guess progress is progress.. although it’s the deposit/mortgage lending percentages that need to be looked at. As a married couple in our mid 30’s, with decent jobs, even we can not afford to save the amounts needed for deposits. We currently rent our home and feel stuck in a vicious never ending cycle.
    Owning your own home in your mid 30’s should not be this difficult.

    Comment by Gill — August 29, 2019 @ 8:47 pm

  5. Hi,

    Those changes are great particularly the decreased stair-casing increments.

    If the government are struggling to get so-called ‘Locals’ to buy then they should think about making it more accessible re deposit scheme. The very people these houses are being built for won’t be able to afford the minimum deposit amount of £5,000.00 straightaway in one lump sum. Look at that.

    Also, look at all the old flats, maisonettes that are disused or left for auction and out them on the scheme too. Resource and Re-use! If there is quite a bit of work to do then people would be happier to contribute towards it if their deposit was smaller. Make a house a home! This was a from a 41 year old single lady who went travelling in her thirties and concentrated on career and now can’t get on the property ladder.
    It’s nice to be asked what we think.
    Thank you

    Comment by Cherry — August 29, 2019 @ 7:45 pm

  6. Just another cynical ploy to keep house prices high, builders bonuses extreme and new home renter/buyers in debt forever.
    They have proposed nothing that would make housing cheaper which is in fact the answer to the first time buyer issue, not just more schemes to borrow and rent.

    Comment by Steve — August 29, 2019 @ 7:37 pm

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