Buyers pull out as lenders cut maximum mortgage for shared ownership
Shared ownership sales slump
Housing associations have seen an alarming increase in the number of clients withdrawing from purchases since the end of the last 90 per cent shared ownership mortgage last month.
Leeds Building Society cut the maximum loan it would offer shared ownership home buyers from 90 to 80 per cent of their share, on 14 July.
It was the last lender left in the shared ownership market offering 90 per cent loans, according to the National Housing Federation.
Catalyst Housing Group carried out a snap survey of other major players after it saw would-be buyers disappear as a result.
David Ellis, director of business development at Catalyst Housing Group, said: ‘We have seen potential clients withdraw from purchases as a direct consequence of being forced to find a 20 per cent deposit.
‘Our survey of other housing associations tells us this is a pattern that has been repeated consistently across the board.
‘A Catalyst spokesperson said six associations had responded, all reporting ‘significant drop-out [since] Leeds pulled out the last product.
‘Catalyst itself had experienced a drop-out rate of 5 per cent, but one association reported it had lost 50 per cent of its would-be customers, he claimed.
NHF policy officer Lucy Thornycroft said that 77 per cent of shared ownership buyers had relied on loans of 90 per cent or more in 2007/08.
She added: ‘Shared ownership, as an affordable housing model, was designed so that people didn’t need a high deposit. The model itself offers lenders a high level of risk protection.
‘A spokesperson for housing association Metropolitan Home Ownership said they had not seen a reduction in sales, but acknowledged that customers were affected generally: ‘They are increasingly reliant on parental gifts, which is changing our marketplace to some extent.
‘A spokesperson for Leeds Building Society said: ‘With effect from 14 July this year, we will lend up to 80 per cent of the borrower’s share (up to a maximum of 75 per cent loan to value).’
Proportion of shared ownership buyers that relied on loans of 90 per cent or more in 2007/08, according to the National Housing Federation.
Valid business the NHF estimates banks turned away on shared ownership products last year.
Proportion of would-be clients one association says it lost since the last 90 per cent deal was dropped, according to Catalyst Housing Group survey.