First-Time Buyers have been hit hard over recent years by rising house prices in the UK.
According to the Office of National Statistics, the average cost of purchasing an entry-level property has increased by nearly 20% across England and Wales in the last decade, reaching £140,000.
In 2013, the government introduced the Shared Ownership scheme to help Brits get their foot on the property ladder, by purchasing 25% to 75% of the property and only paying the 5% mortgage deposit on the share that you buy.
However, new research has shown that the scheme has not hugely benefitted those looking to own their first home. While 40% of first-time property buyers surveyed admitted they needed financial support from family and friends to buy, even with a mortgage, only 19% had utilised a government-backed scheme, and only 6% had taken advantage of Shared Ownership. With average rents rising faster than real wages, it should make financial sense to buy – however, are schemes such as this one really helping the situation?
One worrying factor is the level of confusion surrounding the scheme. According to TotallyMoney’s survey, 50% incorrectly believe that if they buy a home through Shared Ownership, they will completely own the land and property once they have fully paid for the house, when in fact even once you own 100% of the shares in a shared ownership scheme, you own the contractual rights to the property, but not the actual property. Added to this, out of the 1000 respondents surveyed, 70% did not know what ‘leasehold’ meant – but this figure rose to 80% when just considering those who had bought through the Shared Ownership scheme. All Shared Ownership properties are leasehold, meaning that even when you own 100% of the property, it will still be subjected to the previously existing lease.
In addition, once presented with the correct definition of the Shared Ownership scheme, 38% of first-time buyers would still not consider buying through the Shared Ownership scheme. When questioned as to why this was the case, 35% stated that fear over hidden additional fees would deter them from utilising the scheme.
Shared Ownership should be a perfect scheme for millennials to find their foot on the property ladder. Yet, a third of 18-24 year-olds surveyed had never even heard of the scheme, and 76% had an incorrect idea of the minimum share of the house they could buy through the scheme (which is 25%-75%).
Currently, around 200,000 UK households are in shared ownership homes. With double the amount of shared ownership homes built in 2016-2017 (8,810) compared to 2015-2016 (4,110), this figure can only be expected to increase.
A representative from TotallyMoney commented: “With entering the property ladder becoming increasingly difficult, and with this step being so important to many, it’s important to clear the smoke that exists around the schemes existing for first time buyers today in order to help them make the best financial decision. Though many do not have a rounded understanding of what the Government Shared Ownership Scheme is, for those that do understand it can be a useful tool to become a homeowner. We have conducted this research and created this guide to open up understanding on Shared Ownership for those looking to buy so that they too can take advantage of it.”
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