Sharing from the start
COULD first-time buyers be the key to getting Britain out of a postcoronavirus recession? That’s the view of some within the property industry, who are urging the Government to lift mortgage restrictions introduced after the 2008 financial crisis.
These reduced the proportion of higher loans-to-income mortgages, which they say has disproportionately affected firsttime buyers.
Now the Intermediary Mortgage Lenders Association has called for a reassessment of these rules because they expect interest rates to remain low for “decades to come”.
Kate Davies, executive director of IMLA, also says early signs for optimism about the property market’s long-term future are coming from first-time buyers.
“The figures speak for themselves,” she says. “Pre-crisis, the first-time buyer market was showing great signs of recovery since the financial crash in 2008, with a record high of £60billion lent to new homebuyers in 2019. Before the recent pandemic, this rise in new homeownership looked set to continue.
“There is clearly demand out there and, as life begins to return to some form of normal after Covid-19, we believe there is scope for new homebuyers to help lead economic recovery in the UK. It also seems likely that interest rates will continue to remain at a very low rate for some time.”
The IMLA says the three per cent “stressed rate” that lenders must apply to calculate whether applicants can afford a mortgage looks even more out of line with economic reality now that long-term government bond yields are below one per cent.
It’s this that has led to the need for huge deposits from first-time buyers who are inevitably paid less than older mortgage applicants who have built up equity to use as a deposit for their next home.
The association is also calling for the Government to work with the property industry to find a successful long-term replacement for Help To Buy, which is due to be restricted to first-time buyers from next year and to end completely in 2023.
AT the same time SO Resi, part of the housing association Metropolitan Thames Valley, has seen a notable rise in shared ownership enquiries since England’s property market was released from lockdown.
Enquiries were up by 130 per cent in the week following the easing of restrictions, with a surprising number of reservations during lockdown itself.
Kush Rawal, director of residential developments at Metropolitan Thames Valley Housing, explains: “Shared ownership is a much more affordable option for first-time buyers with a lower deposit amount saved.
“In recent weeks many of the higher loan-to-value mortgage deals have been removed from the market and so shared ownership will certainly be proving to be an attractive option for first-time buyers.”
Shared ownership allows the purchase of between 25 and 75 per cent of a property for a deposit of five to 10 per cent of that share, with rent paid on the remainder to the housing trust.
“The affordable nature of shared ownership will be especially appealing for millennials looking for a financially realistic route into homeownership, with a lower deposit requirement and a more manageable monthly mortgage commitment,” says Rawal.
“They can always increase shares in the property at a time when they feel able to and as their finances allow.”
SO Resi sales and marketing suites at nine developments across London and the South East have reopened, although customers have to complete a virtual viewing before making an appointment to visit the development.These includeTimes Square in Welwyn Garden City, Hertfordshire, where a 25 per cent share of a studio apartment worth £215,000 costs from £53,750. One and two-bedroom apartments are also available (0208 607 0550; soresi.co.uk).
Welwyn Garden City was Britain’s second garden city, built in 1920 as a new town for healthy living and designed to combine the benefits of countryside with city living and to avoid the disadvantages of both. Sounds perfect for the postcoronavirus world.