Change to Shared Ownership
It has recently been announced that shared ownership properties could be getting an overhaul. Housing Secretary, Robert Jenrick, has unveiled plans to change shared ownership schemes which allow people to buy a certain percentage of their home, as little as 25%, and then pay a subsidised rent on the remaining share.
At the moment people have to buy extra shares in their property in 10% increments, meaning that families often have to remortgage to have the funds to buy the next part of the property. This process is known as staircasing and it often takes homeowners years to gain a majority of the share in the property. It has been announced that the system could be reformed to let people to buy shares of 1% at a time, a stark difference to the current 10% required each time. For example, on the property worth £150,000, an individual could buy the first 25% at £37,500 (raised with the aid of a mortgage and savings) and then 1% chunks at £1,500 instead of 10% at a time, around £15,000.
This reform is another part of the government’s many systems to make owning your own home a more realistic prospect for thousands of people, along with recent stamp duty changes for first time buyers and Help to Buy mortgage/ISA schemes. It is hoped that it will allow more lower income families to move out of the rental sector.
The announcement has been criticised by some saying that instead the government should be focusing on building more properties instead of these schemes which are often high in administrative costs. However, the recent announcements are likely to be welcomed by those looking to get on the ladder as soon as possible.
The announcement comes at a time when it has recently been reported that parents spend so much money helping children buy property that they are now among the biggest mortgage lenders. Thousands of prospective homebuyers are reliant on parents gifting significant sums of money to buy their first home or upgrade to a larger property. This is despite many parents worrying they have not saved enough to last their retirement. Schemes like the above will hopefully mean that fewer people are having to rely on gifts from parents to become home owners.