Friday, 06 March 2015

Traditional lenders’ reluctance spurs associations to offer shared ownership mortgages

Landlords to launch £175m bank

A group of housing associations are drawing up plans to launch a £175 million bank to offer shared ownership mortgages.

The landlords, including Orbit, Affinity Sutton, Sovereign, Moat and A2 Dominion, initially hope to provide enough funding for 3,000 mortgages.

The bank could launch as early as next spring and, if successful, could then expand. Discussions are at a very early stage and no landlord has yet made a firm commitment.

Under the scheme, led by consultancy Tribal, landlords would invest cash equity upfront into a fund that will generate interest payments. The plans were drawn up to combat tenants’ ongoing difficulties in getting mortgages and the continued reluctance of some lenders to expand the shared ownership market, worth an estimated £400 billion in England alone.

Brian Johnson, chief executive of 20,000-home landlord Moat, attend-ed discussions with Tribal and other associations on Monday. He said: ‘Anything that makes shared ownership more accessible has to be a good thing as the lack of availability of mortgage finance is increasingly an issue. But whether this model works for individual associations depends on what borrowing they have access to.’

Mr Johnson said Moat had yet to decide on its level of involvement.

The plan would see the associations use equity as security to borrow against, and lever in investment from banks, building societies and institutions. It is hoped an initial fund of £50 million could attract a further £125 million of investment, providing enough funding for 3,000 mortgages in the scheme’s initial phase.

It is hoped that the move would enable associations to benefit from scale and thereby reduce costs.

Simon Randall, a consultant for Winckworth Sherwood, is also advising on the scheme. He said: ‘It would encourage house building, [and] could therefore be important in getting shared ownership schemes off the ground.’

Mr Randall said two local authorities were also potentially interested in joining the scheme.

Once associations have decided whether to take part a steering group will be established to commission research into the specifics of the model.
Paul Tennant, chief executive of Orbit, said: ‘It is important we change so that we are not always reliant on grant funding.’

Tony Quigley, director of home ownership at 30,000-home Sovereign Housing Group, said the association is considering ‘a number of options’ to improve mortgage access.

Readers' comments (14)

  • Looks like they can't get the established lenders to support shared ownership so they have to set up this bank to make it fly.

    Shared ownership is a dead-dog of a product for a buyer. Its only driver is HAs doing what they shouldn't be doing - turning a quick profit, creating an artificial market, putting buyers into debt.

    Don't Ireland, Spain and the US serve as a warning to these chancers.

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  • Chris Webb

    Do I want my landlord to become a bank?

    This question needs to be asked of tenants, and their answer applied.

    Do I want my bank to be my landlord? - considering their track record on VFM and sustainable finance - NO - considering their track record on customer service - NO - considering their record on unequal treatment of staff - NO.

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  • Keith Cooper looks in-depth at shared ownership on another part of the site.

    He reports: "Yet Professor Bramley’s research calls into question the shared ownership model’s value to the consumer. ‘The housing association sector, with a few honourable exceptions, is using low-cost homeownership to make a profit to cross-subsidise. In the end, they make more surplus and their shared ownership rents are higher than they need to be.’"

    Cross-subsidy? That's a spinner's line. It's screwing a profit and more than most PSL would hope for - and attract the opprobium of Joe Stalin on this site.

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  • Excuse me, but did the UK Tax Payer not recently come to the rescue of our big bank mortgage lenders on the proviso they started to help out business's and new mortgage lenders.

    Part Buy Part Rent home ownership is the worst form of ownership as anonymous is right it provides a lucrative quick buck profit for Housing Associations/ RSL's to be able to offload poor quality new build homes that are not affordable to allow the majority of key workers for whom they are intended for to be able to afford anything more than a 50 or 75% stake in their hugely inflated costly homes with inflated 50% rent together with having to usually fork out for a 100% liability to contribute towards maintenance and service charges.

    Any spare Government cash to build new affordable homes for key workers whether directly from the Government or indirectly from the now part nationalised UK banks should be given over to locally elected authorities to fund housing programmes and not the Johnny come lately profiteering private housing sector landlords that masquerades as social housing providers!

    Stephen West

    A leaseholder whose landlord is one of those hoping to get a slice of UK tax payers monies invested in British Banks to be able to turn a quick buck.

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  • Why on earth is the government funding these labrynthine schemes designed to deliver a profit to an intermediary rather than helping the prospective home owner up front with a bung or a discount such as Right-to-Buy (which rewards the tenant who has effectively funded the original costs of building).

    It's a Gordon. Complex. Deceitful. Dysfunctional.

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  • As a very happy shared owner of several years, I couldn't recommend the scheme enough for someone doomed to years of renting privately and not being able to get on the property ladder but earning a decent amount of money.

    Anything that helps people do this should be applauded not dismissed. Unless you already own a home of course!

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  • Well your very lucky as statistics show that more homes repossessions come from those having bought in to part buy part rent schemes, with over the top purchase prices which cannot be negotiated, high rental on the remaining part together with service charges and maintenance costs, added together with local council rates. This means that a single person would need a disposable income of £35k a year, not many nurses earn that much! So where do they get off calling these schemes affordable. In our neck of the woods South London we discovered one of these landlords who are hoping to get involved in these schemes, were granted £600,000k by the Housing Corporation to build 30 new part buy part rent affordable homes for key workers. The homes and rent were pitched so high, that after 3 months only a few sold, the RSL then asked the HC if they could sell them on the open market, they were given permission and did not have to repay the grant funded by tax payers. Many were then sold to block purchasers who then sub let them out. This is by far not an isolated case as we dare say other RSL's are doing exactly the same.

    Give the money to our elected authorities to benchmark for real affordable housing for key workers!

    Stephen West

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  • Anonymous | 01/10/2010 3:39 pm

    Stephen West | 01/10/2010 5:22 pm

    Both, “nail on head”.

    Stephen – that’s nothing – one of the G15s wrote down £4.5 million last year re: ropey Shared Ownerships.

    £350k flats, some of them – never going to fully own. Shackles as T&Cs – many stuck, can’t get out of.

    Key Worker term covers all sorts now. Indeed, many schemes advise you that you can earn up to £65k.

    Some SO now fancily called Try before you Buy (Dog, end of no matter how you dress it up). Many dual incomes and job types way out of usual social tenant profile – again because aimed at perceived middle classes now because of costs / or anyone else that can afford and wears rose tinted glasses.

    Where does that leave the dual income couple, £30k, no children…………nowhere.

    Bring back decent RTB discounts, portable TIS – remove all the locks ins. Do homework to ensure as reasonably possible, tenant not sub-prime, thus helping those long term tenants get on ownership ladder, quickly vacating a social home back into stock ( in case of TIS ). Like for like re-build if RTB given.

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  • Judging by what Stephen West says, you begin to suspect that the intention of SO is always open market sale.

    Collect the bung from HC, hang around for a few months, declare SO unworkable, apply to sell on the open market.

    How else could the schemes be so designed that on paper they are unattractive if not designed to be unattractive to purchasers under the initial scheme.

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  • And as if to illustrate the point - look at earning profile for those on editorial article " Fair Share " - just posted.

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