Homebuyers ignore affordable housing schemes

Nia Williams

November 10, 2010

This is according to Halifax which believes that homebuyers could be missing a trick when it comes to exploring all the available opportunities in order to step onto the housing ladder.

A lack of affordable housing is widely regarded as the key reason that prevents buyers from stepping onto the property ladder yet nearly three quarters (72%) of respondents to a Halifax survey said that they would not consider buying a house through a shared equity or ownership scheme.

Almost a fifth believed that it would be too expensive to pay both a mortgage payment and rent monthly. However, the reality is quite different.

For example, on a typical two-bedroom shared ownership property that costs £160,000, a 75% share would cost £120,000 with a deposit of 15% (£18,000). The mortgage would be £102,000 which, on a 3 year fixed rate of 5.79% for instance, would cost £652pm on a repayment basis over 25 years. The rent would be £91.66 per month; along with the mortgage repayments, the total monthly cost to the homeowner would be £743.66.

Many borrowers will also be able to access mainstream mortgage rates meaning that they don’t have to choose from a reduced range of products or pay a premium.

Of those who said they would consider a shared equity or ownership home, over two thirds (69%) said it would make home buying more affordable for them.

Whilst 68% don’t know about any affordable housing schemes in their area and 15% of those who were not interested in the schemes said that the area and type of property available via affordable housing schemes would put them off buying, a savvy four in ten of those who would consider the schemes said that buying a shared ownership or equity home would enable them to live in an area they couldn’t normally afford.

Nearly a third (31%) of people don’t want to find out more about how to get onto the property ladder with the help of an affordable housing scheme and one in ten don’t know where to turn for help and advice.

Stephen Noakes, Halifax commercial director for mortgages, said: “Affordable housing provides a great leg-up onto the property ladder and shouldn’t be overlooked. Many people don’t know where to turn to find out more about these schemes or wrongly believe that they aren’t eligible, but talking to a housing authority or developer is a good place to start. When it comes to looking for a mortgage, buyers could be surprised to hear that they can usually qualify for a mainstream deal.

“For those who think they are priced out of the market we would encourage them to consider an affordable housing scheme. Once a portion of a home is purchased, most schemes will allow the owner to ‘staircase’ – a process that enables them to slowly increase the amount of the home they own – as and when they can afford it, providing valuable flexibility.”

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