MORTGAGE STRATEGY - ROBYN HALL

November 2008

Nick Rhodes, Sales Director of Independent Mortgage Helpline.

Affordable housing is not immune from the downturn, and more than ever the Government is looking at ways it can boost affordable housing levels and increase the number of homes available to buyers who are unable to purchase on the open market.

Affordable housing output has certainly suffered as a result of the economic situation. Housebuilders are required to supply around 40% of new affordable homes as part of their PPS3 commitments, so if housebuilders are not building private homes, then they are not building affordable homes either.

In addition, those individuals buying through shared equity schemes are subject to the same economic concerns as anyone else, and are less willing to buy a home in the current climate, with fears of falling house prices and potential job losses. However, following the significant interest rate cut over the last two months, the Government must put pressure on lenders to pass on savings, and boost consumer confidence. There is no excuse for the high rates they are still charging on their mortgage products. This affects all buyers, including first time buyers and those purchasing through shared ownership, who are the lifeblood of the market.

The Government has made much of its commitment to provide new affordable homes, which has become the cornerstone of its national housing policy. The Housing Corporation has said its £8.4bn National Affordable Housing Programme will provide 155,000 new homes over the 2008/11 period, almost double the rate achieved in the previous two years, and it will be embarrassing if this target is missed.

This means we can expect to see Whitehall making serious steps to help the industry. Already last month the Government announced a £13million deal to buy unsold homes from developers to use for affordable homes, thereby supporting the housebuilding industry whilst also boosting the numbers of affordable homes during the downturn.

Homebuy Direct, the latest shared equity scheme launched by the Government as part of September's rescue package, aims to bring a further 10,000 first time buyers into affordable home ownership, backed by £300m of CLG funding. The scheme is offered on new build properties brought forward by developers, providing buyers with an equity loan of up to 30 per cent of the purchase price, co-funded by the Government and the developer. However, there is a long way to go in terms of educating the homebuying public about shared equity schemes and it is essential that the Government acts to address the current confusion as a matter of urgency.

Shared equity counts towards the Government's social housing target, but there are only a handful of lenders seriously involved in the sector. With the ultimate aim being to make property available to those on lower incomes, there is an inherent risk which can be a deterrent. However, the housing association is usually required to include a mortgage protection clause, which guarantees the lender gets its money back before it goes to the housing association, if the borrower defaults on the loan.

It is essential that more lenders become involved in shared equity finance and help kick start the entire mortgage market, rather than sitting back and complaining about the situation, while stockpiling funds and doing nothing to help get the market moving.

The fact is that the Government has demonstrated its ongoing commitment to shared equity schemes through these turbulent times, and it is highly likely that this funding will increase over the coming months, rather than decrease. The tighter lending criteria that will be in place following the credit crunch, with lower LTVs for first time buyers, will mean that despite lower prices, even more first time buyers will be turning to shared equity.

-Ends-

Notes to Editors

About Independent Mortgage Helpline
Independent Mortgage Helpline is part of the New Homes Group, sister company to both the New Homes Mortgage Helpline and New Homes Part Exchange. Independent Mortgage Helpline is an affordable homes mortgage specialist, providing mortgage expertise to purchasers taking advantage of the Government's affordable housing initiatives and shared ownership schemes.

For further information please contact The Wriglesworth Consultancy:

Sarah Randle s.randle@wriglesworth.com,
020 7427 1428

Claire Hendry c.hendry@wriglesworth.com,
020 7427 1407

Back