Rob Clifford, chief executive, mortgageforce A staggering number of people still find that they cannot get on the housing ladder without difficulty. Some 28% of mortgageforce clients in the first quarter of 2003 took out a mortgage which delivered cheaper repayments than the rental commitment they were leaving behind. Monthly affordability simply isn't the issue right now, given the attractiveness of rates. The problem is the gap between the maximum mortgage available and house prices.
Parents acting as guarantors, buying with friends, recourse to unsecured borrowing and even pleading with a lender to stretch income multiples are all solutions of a sort. But buying the home you want on your own, without excessive manipulation of the income to borrowing ratio, can often only be achieved through shared equity or shared ownership.
The shared appreciation approach tried and then shelved by Bank of Scotland, and many shared equity schemes, have the fundamental problem that borrowers ultimately resent paying away the growth in equity upon sale of the property. Most would prefer to have owned the equity outright but house price inflation moves this goal ever further away. Shared ownership needs to be recognised as a reasonable solution.
The government's Starter Home Initiative to assist key workers may be regarded by some as too narrow but if it assists thousands more tenants to become homeowners, then you have to credit its value. The terms of the lending are dictated more by the SHI scheme rules than by the lender, as the government permits mainstream lenders to provide the mortgage. One such participant lender is abbey which permits up to a 25% deposit under the SHI scheme.
Whether it's SHI for key workers or for shared ownership for any appropriate applicant, the Ipswich offers a great solution for the growing number of people priced out of the housing market. As the Ipswich is one of the few lenders offering 100% LTV, key workers do not have to provide a personal deposit. Even those based in the most expensive areas can get help. The minimum share being purchased can be as low as 15% which is more helpful than many other lender's criteria. After the initial purchase further loans are available to increase the share of the property. Borrowers can benefit from fixing their payments for two years or choose an upfront discount for 12 months.