Buyers are not taking up the right product because they are ‘confused’
HCA reviews shared owner lease
The government’s housing agency is reviewing the standard shared ownership lease in a bid to encourage more banks to provide mortgages to shared owners.
Jamie Ratcliff, head of intermediate markets at the Homes and Communities Agency, did not give details of the reforms but said changes to the lease would be ‘kept to a minimum’.
It is understood that changes to new leases could include obliging housing associations to tell banks if they do not agree to a mortgage, rather than informing banks if they approve of the deal, as is currently the case.
The overhaul of the lease is part of a review of the intermediate market by the HCA.
The review panel, which includes members from the Council of Mortgage Lenders and the National Housing Federation, is looking at whether the current range of low-cost homeownership and intermediate rent products are clear for buyers, lenders and providers and whether better information and systems are needed to direct customers towards the most suitable products.
Speaking at a Capita conference on affordable housing on Thursday, Mr Ratcliff said a study commissioned by the agency found that potential buyers were confused about the differences between intermediate products and tended to choose their home based on location rather than whether the type of ownership was best for them.
Research by the HCA found that equity loan products were better suited to people who could pay them off relatively quickly, whereas shared ownership schemes worked well as a long-term tenure.
Buyers on many equity loan schemes would see their costs jump if they paid their loans off 26 years after acquiring them rather than doing so after 25 years,
Mr Ratcliff said: ‘We think there is a case for a clear offer. One of the problems is attaching “homebuy” to everything even when it is an equity loan which is confusing.’
The agency is investigating deferred land receipts whereby landowners, who are currently reluctant to sell because of low prices, could defer the money they would receive and be paid later with cash from equity loans or shared ownership, therefore benefitting from future land inflation.
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