Changes to the Right to Buy (RTB) homebuying scheme introduced by the Government late last year, saw the maximum discount offered to homebuyers scaled back to the pre-2012 levels of between £16,000 to £38,000.
The announcement received mixed reactions, with those opposing the changes saying they undermined the purpose of the scheme and will result in limited homeownership opportunities for social housing tenants.
Yet the flurry of RTB applications received by Norton Home Loans over the last few months would suggest borrowers remain undeterred by the changes, with many looking to act before the new caps fully take hold.
Demand from eligible borrowers shows no signs of slowing in the next few months either, which presents a valuable and immediate opportunity for brokers to support underserved clients looking for a genuine route to homeownership.
Norton Home Loans has been a longstanding supporter of the RTB scheme, which it considers to be a vital stepping stone for many social housing tenants wanting to get onto the property ladder.
As an important financially inclusive solution, the RTB scheme presents those borrowers for whom mainstream lending is out of reach with the chance to achieve greater financial stability by owning a home.
The recent changes to the scheme mean there is now a sense of urgency surrounding many of these applications and brokers will have to ensure their clients have all the documentation they need to hand before submitting an application to ensure they waste no time in trying to secure a loan.
This is especially important in those RTB cases that are less than straightforward, such as those from clients with historic or ongoing credit issues; or those on a lower income or in receipt of benefits.
Many of these borrowers often find themselves unable to access the mainstream mortgage market due to the strict lending criteria and automated underwriting processes used by high street lenders.
Often, these borrowers are also looking to buy property of non-standard construction, such as those built using pre-cast concrete, as well as high-rise flats or deck access flats – properties that many mainstream lenders will also not consider.
In contrast, specialist lenders like Norton Home Loans thrive on finding solutions for those who fall outside the parameters of mainstream lending and our flexible and personalised approach enables us to individually assess each application and find a solution to meet the differing needs of each and every borrower.
The current maximum loan-to-value (LTV) for RTB borrowers is 75%, with a maximum loan size of £250,000. Applications from customers with minor or temporary blips on their credit record in the last 12 months will also be considered, as well as those with historical Country Court Judgements (CCJs), defaults and other credit impairments.
There is also the option for borrowers to exceed the purchase price by up to £10,000, up to a maximum of 60% LTV, enabling them to carry out essential improvement works on a property.
With the mainstream options for RTB clients becoming increasingly limited, and the tightening of the scheme likely to lead to a slowdown in applications, broker with clients looking to secure a RTB mortgage should ensure they strike while the iron’s hot and make the most of the current level of demand in the market.
With the RTB landscape starting to shift, the window of opportunity may soon be closing, and brokers must act quickly to help borrowers achieve their goals. Working with a lender that understands this area of the mortgage market is crucial however, particularly in those cases where the client does not fit the mold of mainstream lending.
There is a real opportunity here for brokers to help underserved borrowers achieve their goal of buying a home. Seeking out a specialist lender with a flexible approach to underwriting could make all the difference between whether a case progresses, or whether it falls apart.
David Binney is head of sales at Norton Home Loans
