Low-cost schemes now help a wider pool of customers

26 July 2010

During my conversations with lenders, advisers and developers that do not operate in the low cost home ownership market I’m often asked about the profile of households that buy through the government’s affordable housing schemes.

To answer this requires a slight digression. At the Homes and Communities Agency I work in the intermediate markets team which defines the type of people we try to help into sustainable home ownership. The intermediate market encompasses everyone who has a household income that is too high to qualify for social rented housing but not high enough to buy a home on the open market.

So the net is cast quite wide. In fact, the household income threshold that is one of the eligibility factors in accessing low cost home ownership is £60,000 a year, which means the intermediate market makes up 80% of the working population.

In fact, many of your clients could qualify for one of the government’s HomeBuy schemes.

A decade of house price inflation combined with the market downturn means deposits are now the single biggest obstacle to people buying homes on the open market.

In turn, this means low cost home ownership schemes have been attracting a new type of customer lately.

Those who a couple of years ago would have been able to buy property on the open market are now unable to do so without either a year’s gross salary in the bank or parents who are wealthy enough to help.

It’s possible that many of your clients could qualify for one of the government’s low-cost HomeBuy schemes

So is low cost home ownership affordable and accessible? Our statistics suggest that affordability is not the only driver for buyers accessing our schemes, nor is it necessarily the most important one.

For example, for our equity loan product HomeBuy Direct the overall median household income of people accessing the scheme is more than £31,000. In London, 20% of HomeBuy Direct purchasers earn more than £45,000.

The average property purchased through HomeBuy Direct is £152,000 - 15% more than the average open market first-time buyer price.

And on average last year, HomeBuy Direct purchasers took out a mortgage of £106,000 - 7% more than the average open market first-time buyer.

So low cost home ownership initiatives can provide a wide range of support for a wide range of households. Many of our customers are in good jobs with strong incomes. Anecdotally, a lot are also young, aspirational and financially astute.

The government’s HomeBuy scheme provides an access point for these customers, helping them to get a foot on the housing ladder when otherwise they would not be able to.

Affordability is not the main reason customers approach us at the HCA - it’s increasingly a question of accessibility.

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