Shared ownership, a scheme which lets households buy between 25 per cent and 75 per cent of a home with a mortgage and pay rent on the rest, may be part of the solution.
Because these households are only buying a share, they do not need to raise such a high deposit or borrow as much with a mortgage.
And because they are paying a rent on part of the home, they are partly protected should mortgage rates rise.
Key Points
- It is first-time buyers who have benefited most from a resurgence in mortgage lending at high loan, low deposit ratios.
- Thirty-one per cent of the households using Help-to-Buy could have afforded to buy without support.
- First-time buyer numbers are almost back at their pre-financial crisis peak.
Given the same initial deposit, the monthly cost of owning 50 per cent of a home through shared ownership is roughly equivalent to buying the same home with Help-to-Buy for the first 15 years of ownership. It is substantially cheaper than buying without support.
Around 10,000 households bought a shared ownership home each year between 2015-16 and 2017-18.
If all the households using Help-to-Buy who genuinely could not afford to buy a home without help used shared ownership instead, this would increase demand for the scheme to 25,000 a year, an increase of 150 per cent.
First-time buyer numbers have doubled in the past decade and are almost back at their pre-financial crisis peak.
However, with interest rates set to rise and the death of Help-to-Buy on the horizon, the future looks less certain.
Shared ownership will help some buyers get half a foot on the housing ladder, but without further intervention we can expect to see first-time buyer numbers fall, and rising demand for good, secure homes for private rent.
Lawrence Bowles is a residential research analyst at Savills
