First time buyers turning to affordable housing schemes

| November 12, 2012
First time buyers turning to affordable housing schemes

New research from Lloyds TSB suggests that more first time buyers are using shared equity and shared ownership schemes to help them take their first step on the property ladder.

The bank found that 46 per cent of first time buyers are now using affordable housing schemes, with 26 per cent of them saying that such schemes were the only way they could afford to buy their own home.

Twenty-five percent were attracted to the schemes because the monthly mortgage repayments are lower, while 24 per cent said they were able to buy a property in an area that would otherwise have out of their price range.

Fifteen per cent of those surveyed by Lloyds TSB said that the downturn in the economy had prompted them to look at affordable housing options, which they otherwise would not have considered.

Since the credit crunch, the high deposits required to secure a traditional mortgage has made buying unaffordable for many would-be house buyers.

Lloyds TSB found that while 81 per cent of first time buyers have a basic or good understanding of shared ownership schemes, only 64 per cent had similar knowledge of shared equity options.

There were regional differences in levels of understanding, with 70 per cent of Northerners understanding shared equity schemes compared with just 53 per cent of first time buyers in the East of England.

However, 40 per cent of first time buyers are unaware of the affordable housing schemes available in their area.

Under shared ownership schemes, which are provided through housing associations, the purchaser buys a share in the property of between 25 per cent and 75 per cent of its value.

The purchaser takes out a mortgage to buy this share and pays rent to the housing association on the remaining share.

Shared ownership schemes are available to people earning £60,000 a year or less, who are either first time buyers or who used to own a property but can no longer afford to buy one.

If the house is put up for sale, the housing association has the right to buy the property back first.

Under a shared equity scheme the purchaser also buys an equity share in a property with the aid of a mortgage, but the remaining share is owned by the developer and/or the Government and the purchaser does not have to pay rent on this share.

When the property is eventually sold the developer and/or Government are entitled to receive their share of the value of the property.

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