‘Regulation is stifling shared ownership’

Nationwide is warning that regulations are undermining the growth of shared ownership and shared equity lending.

Speaking at a Westminster Social Policy Forum on housing last Thursday, Nationwide head of mortgage strategy and policy Andrew Baddeley-Chappell warned that regulations were stifling the sectors.

His warning came the same day as the Government unveiled a £280m boost to its FirstBuy shared equity scheme which it says will help 16,500 first-time buyers purchase property.

Nationwide is one of the biggest shared ownership lenders but Baddeley-Chappell told delegates that the current regulatory regime made shared equity and shared ownership unattractive to many lenders.

Shared ownership works by the buyer purchasing between 25 and 75 per cent of the property and then paying rent to a housing association which owns the rest. For a shared equity loan, buyers must fund at least 70 per cent of the deal through a mortgage or savings, with the rest funded by the Government or homebuilders, who will retain their share in the home until it is sold.

Baddeley-Chappell said: “There are some real challenges from the regulatory regime. Shared ownership is broadly okay but shared equity brings much more trouble because the regulator is requiring lenders not just to consider the share borrowers are buying but the whole property which, of course, they can’t buy.

“These markets are desperately struggling and while the Homes and Communities Agency has done a good job trying to motivate, it is a sad feature of the market that this sector is under-serviced at the moment because of competitive difficulty.”

Baddeley-Chappell says shared equity and shared ownership borrowers are “high-risk” for lenders.

He says: “They are complex models with a combination of potentially higher-risk borrowers with more complex needs.

“The risk comes not just from mortgage lending but increasingly reputation and regulatory. There is a strong case to suggest you can lend on shared ownership in a successful way but there are other risk factors.”

Lentune Mortgage Consultancy director Stuart Gregory says there is a lack of demand for shared ownership.

He says: “Every first-time buyer I have seen recently had assessed shared ownership and decided instead to save for a 10 per cent deposit and buy on the open market. Many who have bought homes are finding it a struggle to sell them which is putting buyers off using it.”