RTB push could leave tenants locked out

Robyn Hall

June 4, 2013

Speaking at the House of Commons yesterday, Prisk said the since the government’s reinvigoration of the Right to Buy scheme last year sales have more than doubles to the highest level in six years and he wanted to continue the momentum.

He said: “We believe it is vital to ensure that all eligible tenants know exactly how to exercise their right which is why this month we are writing directly to more than 500,000 households right across England including in the metropolitan city of Leeds.”

But brokers are concerned that the government is unaware of the problems within the lending market for Right to Buy customers which may leave many, who have been fired up to purchase their house, disappointed.

Brett Cocking, mortgage broker at Manchester-based Brytannic Extra Finance, said: “Part of the problem is a lot of council tenants have had debt problems in the past. Once upon a time there were lots of avenues for those types of clients but that market has all but gone leaving only high street lenders offering Right to Buy mortgages.

“It is all well and good letting people know that they can buy their own home but there is a shortage of options available to them.”

Cocking was in praise of the principles of the scheme which he said was a “great step up for people who would be able to raise their own deposit without it.”

He added: “And they don’t have to remain in social housing their whole lives, after five years they can look to sell the property and move into a privately built home.”

A history of poor credit is just one obstacle barring the road to home ownership for many tenants. The construction type of council properties often does not fit within mainstream lending policies.

Ashley Brown, director at independent broker moneysprite, said: “Often the tenant may live in a block of flats which poses a problem if they live above the fourth floor. Blocks of flats, particularly high rise, are unacceptable to most lenders which is unfortunate because this is a common type of social housing.”

Affordability is another issue which makes home ownership a pipe dream for many.

Brown said: “Affordability is major problem for tenants who live in areas where property prices are higher than average.

“Take for example Chelsea and Kensington, even with the maximum discount of £100,000 which is available to those living in a London borough (£75,000 outside London), the mortgage is so huge that tenant cannot afford it.

“Setting aside the reasons which may prevent a tenant getting a mortgage, the level of initial enquiries is very low – we simply don’t receive the same number that we used – perhaps councils are not letting people know they are eligible?”

Brian Murphy, head of lending at the Mortgage Advice Bureau, believed the low level of enquiries may be down to the tenants personal choice.

He said: “While 500,000 may be eligible to buy their own home under the government’s criteria, not everyone may want to.

“Homeownership is right for some but not for everyone. Those who have not exercised that right already may not have done so because they don’t want to or do not feel that it is the right choice for them. Tenants in social housing are likely to be on lower income therefore have a higher debt to income ratio and taking a mortgage may not be within their means.”

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