Government changes shared ownership to 1% chunks

by Nick Thompson

10:54 AM, 28th August 2019
About A year ago

Government changes shared ownership to 1% chunks

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Government changes shared ownership to 1% chunks

The government will review a new national model for shared ownership to make it easier for people to buy more of their own home, including allowing them to buy in 1% increments.

This plan is hoped to facilitate Boris Johnson’s priority to level up the whole country, closing the opportunity gap and helping millions of young people into home ownership.

At present, they have to buy an increased share in 10% chunks, which can be as much as £45,000 per time. This process of increasing the stake until the property is bought outright is known as “staircasing”.

People use shared ownership to buy a proportion of their home – which can be as little as 25% – and then pay a subsidised rent on the rest.

Housing Secretary, Robert Jenrick, said: “Building the houses this country needs is a central priority of this government. We know that most people still want to own their own home, but for many the dream seems a remote one.

“My mission is to increase the number of homes that are being delivered and to get more young people and families onto the housing ladder, particularly those on lower incomes. That’s why I am announcing radical changes to shared ownership so we can make it simpler and easier for tens of thousands trying to buy their own home.

“Help to Buy, the cut to Stamp Duty and our home-building programmes are already making a real difference, but I am clear we need to go much further if we are to make the housing market work.

“I will be looking at ensuring young people from Cornwall to Cumbria aren’t priced out of their home areas and how we can build public support for more house building and better planning. This government will help a new generation to own their home.”

The Housing Secretary also announced he will look to reform the planning system to increase housing delivery and make home ownership more affordable for people looking to buy their first property, particularly in areas which are least affordable.

This could include increasing the number of homes sold at discounted prices to people trying to get onto the property ladder, boosting homeownership and helping build local support for new development.

Homeowners buying a property under Help to Buy will be given new freedoms which will make it easier to take out a 35-year mortgage, in measures announced today.

The government has also today closed a loophole with immediate effect that prevented people from taking out a mortgage with a term of more than 25 years.

The change means homeowners can reduce their monthly mortgage repayments by spreading their borrowing over a longer period.

Shared ownership case studies

How will it work?

£150,000 shared ownership property

  • A family in a £150,000 shared ownership 2-bedroom property could buy an initial 25% stake with a mortgage for £37,500 while paying subsidised rent on the remainder.
  • They would then have to save up £15,000 at a time to increase their stake, and decrease their rent – which is beyond the reach of many.
  • Under our plans, shared owners would be able to save up 1% at a time – or £1,500.

£200,000 shared ownership property

  • A family in a £200,000 shared ownership 3-bedroom property could buy an initial 25% stake with a mortgage for £50,000 while paying subsidised rent on the remainder.
  • They would then have to save up £15,000 at a time to increase their stake, and decrease their rent – which is beyond the reach of many.
  • Under our plans, shared owners would be able to save up 1% at a time – or £2,000.

£450,000 shared ownership property

  • A family in a £450,000 shared ownership 4-bedroom property could buy an initial 25% stake with a mortgage for £112,500, while paying subsidised rent on the remainder.
  • They would then have to save up £45,000 at a time to increase their stake, and decrease their rent – which is beyond the reach of many.
  • Under our plans, shared owners would be able to save up 1% at a time – or £4,500.

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Comments

Neil Patterson

9:08 AM, 29th August 2019
About A year ago

Mark Hayward, Chief Executive of NAEA Propertymark comments on the Government’s new national model for shared ownership consultation:
“We support thinking creatively about ways to help first time buyers on to the housing ladder and consumers will welcome the opportunity to increase their share of ownership more easily and to simplify the process by which they can sell their homes.
“Government must be careful of the unintended consequences that any changes to Help to Buy could have on the rest of the market as in many cases these are not properties that feed into the general market place but into a ‘cul de sac’ with no assistance to upward activity”.

Michael Barnes

1:58 AM, 31st August 2019
About A year ago

I read "let's use tax payers money to allow people to obtain a valuable asset, particularly in the most expensive areas"

Old Mrs Landlord

6:53 AM, 31st August 2019
About A year ago

In the second example given above the figure of £15,000 should read £20,000 - 10% of £200,000.


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