Over recent months the mortgage market has fallen into a sharp decline as a result of the global credit crunch that swept across the nation last summer and has been wreaking havoc in the financial markets ever since. For first time buyers the situation in the mortgage market has made life very difficult, as despite falling house prices many can still not realise their dreams of getting onto the property ladder because they can not longer get a mortgage due to the change in credit conditions.
Since the onset of the global credit crunch the number of mortgage products has fallen, and mortgages that once provided a financial lifeline to first time buyers such as 100% mortgages have been taken off the shelves. The cost of borrowing has also gone up, with higher arrangement fees and far higher deposit requirements in place from lenders. Interest rates have been rising, with the lower rates being offered only to those with a hefty deposit to put down.
With so many hurdles in their way many first time buyers still find that they are priced out of the market due to lack of affordability. Although many may decide to turn to renting instead, at least for the short term, there is another solution that could prove effective, affordable, and could provide them with a helping hand onto the property ladder, and this is known as shared ownership housing.
Shared ownership is a scheme that is run in conjunction with housing associations, and in short consumers that opt for this scheme take out a mortgage for a percentage of the value of the property and then pay rent on the remaining percentage to the landlord, which is the housing association. The percentage that can be purchased will vary and will be specified by the housing association, but it is important to remember that you can buy additional shares of the property over time until you own the property fully, or you may prefer to stay there on a shared ownership basis until you are ready to sell your share and move on.
One of the main benefits of shared ownership is that you will only need to take out a small mortgage, as you will only be purchasing a percentage of the property rather than the whole property, and this increases affordability both in terms of your deposit and your monthly repayments. You will, of course, be paying rent on the remaining share, so you need to work out whether you can afford both the rent amount and the mortgage repayment before you commit.
Shared ownership is a good, effective way to get onto the property ladder for first time buyers, especially in the current financial climate where mortgages are difficult to come by and repayments and deposit levels are so high for the average first time buyer. As rents continue to rise shared property ownership becomes a more attractive option. Rising interest rates make shared ownership more cost effective especially during the current period of the global credit crunch where worldwide problems are apparent.
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