Almost a quarter of new homes (23%) are now available to buy using a shared equity scheme, according to leading new homes website SmartNewHomes. As first time buyers struggle to raise the large deposits now needed to buy their first home, housebuilders have responded by increasingly focusing on offering shared equity options to make home ownership more affordable.
The current housing market conditions have created unprecedented challenges for large sections of society who wish to own their own homes. Strict deposit requirements of around 20% have made it virtually impossible for first time buyers on average incomes to save enough money to get on the property ladder without parental help.
Shared equity offers another solution to affordability problems and there is now significant support from a wide choice of lenders, making it a straightforward process for potential first time buyers whose household earns £60,000 a year or less. Housebuilders run numerous private shared equity schemes of their own, inviting first time buyers to borrow an equity loan alongside their own small deposit, raising a mortgage for the remaining amount. Many developers have also been awarded FirstBuy funding from the Government, which enables their buyers to access a 20% loan provided jointly by the Government and the housebuilder, putting in their own 5% deposit and raising a 75% loan to value mortgage.
Steven Lees, Director at SmartNewHomes.com, said:
"The fact that nearly a quarter of all the new homes on the site are available with shared equity is unprecedented. Housebuilders have had to focus much more on delivering shared equity options to their buyers, helping them to get around the high deposit requirements which make home ownership impossible for most people.
"According to the Halifax there were around 86,000 first time buyers in the first half of this year, a 10% drop in numbers since the same period in 2010 and half the number in the first six months of 2007, when 181,500 people bought their first home.
"Continued investment in shared equity schemes is paramount to the health of the housing market over the next few years, as the economic downturn continues."
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Date Published: 16 November 2011
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