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HomeBuy "affordable alternative" to Bank of Gran

DON'T worry if you can't dip into the Bank of Granny and Grandpa − shared ownership offers a really affordable alternative for first-time buyers.

That's the upbeat message to frustrated homebuyers from Bev Hall, Sales and Marketing Director at Bromford Homes.

She's responding to a report highlighting the financial squeeze that faces many younger people who can't afford to put down a full mortgage deposit without help from the so-called Bank of Gran and Grandad.

According to the report*, there's been a "staggering increase" in the number of grandparents who are using equity release - borrowing money based on the value of their own homes − to lend or give cash to loved ones.

And one of the most common reasons is cited as helping grown-up children and grandchildren buy a home − with the average amount of equity release said to be around £50,000.

Five-figure sums like that are needed by many first-time buyers, explains the Bromford Homes property expert, at a time when many traditional mortgage lenders are being ultra-careful and requiring a deposit of at least 10 per cent.

"With an average house in the Midlands costing anything up to £200,000 or more, that means first-time buyers are having to come up with a deposit of say £20,000 − and it could be more depending on their household income," said Bev.

"Shared ownership is a really affordable alternative for first-time buyers. It allows people to buy anything from 25 per cent to 75 per cent of a new home and get that all-important foot on the property ladder without having to find a really huge deposit.

"It's made the difference for many, many first-time buyers and yet, in some ways, you could say that shared ownership is one of the property world's best-kept secrets."

Bromford Homes offer buyers the chance to buy between 25 and 75 per cent of their home through their HomeBuy shared ownership scheme and to pay subsidised rent on the remaining share. Buyers can increase that share through a process known as staircasing and even buy their home outright when − and if − their finances allow.

"Shared ownership was designed to help aspiring homebuyers on lower or middle incomes − people who wouldn't normally be able to afford a traditional mortgage," said Bev.

"That's still the case but now we're seeing a change in the demographic of our shared ownership buyers. More of those buyers are people who, before the credit crunch, would probably have been able to buy outright.

"Now, with the housing shortage and consumer credit squeeze, that is no longer possible − unless, of course, they can make a withdrawal from the Bank of Mum and Dad or, as the report suggests, the Bank of Granny and Grandpa.

"These are typically young working people who can afford the five or ten per cent deposit for a 25 or 50 per cent share in one of our shared ownership homes. People that are more likely to progress in their careers, to increase their earnings and to staircase their share and even to buy outright.

"When any buyer comes to us, we go through their finances with them and work out what they can really afford.

"Long-term affordability is a key issue. Personal circumstances change if they do Bromford will be understanding and will work with anyone who finds themselves in financial difficulties."

Bromford Homes is now selling homes for outright sale as well as shared ownership. The development at Priorsleap, Telford, is a first venture into the outright sales market for Bromford Homes, part of Bromford Group, one of the leading providers of affordable housing and support services in Central England.

* The report, from equity release firm Key Retirement Solutions, says that the level of people taking out money from their homes to help family members rather than for other reasons is up from 23 per cent to 31 per cent, according to The Daily Mail. The average home value is quoted as £201,150 and the average equity release as £50,000.

08 August 2012