Since the concept of Shared Ownership was first launched in 1980, the product has proven to be an increasingly popular and affordable way for many borrowers to buy a home.
Designed to help prospective homebuyers struggling to raise a deposit get on to the property ladder, the scheme has been hailed as a much-needed and relatively successful government-backed initiative.
Recently, competition in the Shared Ownership market has grown significantly and a number of new lenders have entered the sector.
This is good news for borrowers as it broadens the range of product options available to those looking to buy their first home and creates healthy competition in the market.
The increase in lenders entering the sector also highlights the growing need and demand for this type of product, with house price inflation and the rising cost of living really testing first time buyers’ capabilities to access a conventional mortgage.
High and ongoing demand
The demand for affordable housing and Shared Ownership products is expected to continue to grow as we head towards 2025.
Higher living costs means many people’s finances are still being stretched and with the ending of the Help to Buy initiative in March 2023, Shared Ownership is now the only government-backed scheme offering support to buyers.
According to figures from the Office for National Statistics (ONS), the average home in London cost 13.9-times household income in 2023.
This fell to 8.3-times for homes bought outside the capital, with the ONS adding that housing hasn’t been affordable for the majority of UK borrowers since 2017.
This situation has been made even worse by the house price inflation seen during the pandemic and the subsequent rise in interest rates, both of which, have made it even harder for first-time buyers to purchase a home.
Addressing the affordability issues facing borrowers is crucial, which is why Mansfield Building Society has been enhancing the product criteria on its Shared Ownership products to meet the growing demand in applications from brokers with clients looking to secure this kind of product.
Many of these borrowers have struggled to meet the affordability assessment of mainstream lenders either because they have slightly quirky circumstances or because they have experienced a credit blip such as a missed utility bill payment in the past few years and were refused a mortgage.
Supporting affordable solutions
It is here that our Shared Ownership mortgages can offer a solution by enabling borrowers to take out up to 95% share (75% LTV) with just a 5% deposit of the share.
This includes houses and purpose-built flats of up to four storeys constructed since 2003.
Mortgages are available for house purchase, remortgage and staircasing for when the client wishes to purchase an increased share of the property.
Whilst all our Shared Ownership mortgages are backed by our prime credit criteria, this can still allow for those clients who may have a minor historic credit blip on their record.
This includes those who may have satisfied a debt management plan over 36 months ago or those who may have missed up to two credit card payments in the last two years.
Mansfield currently has no product fees on its Shared Ownership mortgages and offers a 5-year fixed rate product that stresses affordability at the pay rate, helping to support affordability further.
There is also the option of a 2-year fixed rate product that follows on to a discounted follow-on rate for reduced stress test affordability.
Given the affordability challenges many borrowers are currently facing when trying to secure a mortgage, exploring the options available in the Shared Ownership market could present brokers with accessible and affordable solutions for their clients.
This, coupled with Mansfield’s individual approach to underwriting can help borrowers meet the affordability requirements needed to secure a Shared Ownership mortgage and set them on the path to achieving their homeownership goals.
Tom Denman-Molloy is intermediary sales manager at Mansfield Building Society
