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Call to young who tap into Bank of Mum and Dad

FIRST-TIME buyers who tap into the Bank of Mum and Dad for part or all of their deposits are being urged to consider shared ownership when they try to get their first foot on the property ladder.

The same message goes to the parents, grandparents, other family members and friends who are said to be pouring billions each year into the property market to help young people buy their first home.

Shared ownership should be high on the list of options for many first-time buyers, says Bromford Homes Sales and Marketing Director Bev Hall, because deposits and monthly costs are typically cheaper than when buying on the open market.

Her call is prompted by a just-published survey that says three in ten of first-time buyers since 2009 got family gifts or loans worth an average of £17,000 − or, in other words, more than 60% of the typical £28,000 deposit − according to figures published by housing charity Shelter yesterday (Wednesday).

Bev Hall on HomeBuy
Bev (pictured above) compares those figures with the typical deposit of around £13,065* for a shared ownership buyer in Gloucestershire − one of the areas where Bromford has active part-buy developments like Fortuna, where you can buy a home for as little as £31,250** and your deposit can be as low as £1,563.

"The numbers speak for themselves − highlighting the fact that shared ownership deposits are generally much, much lower than they are for first-time buyers on the open market," says Bev.
"It means young buyers like Claraine Walker and Matt McIntyre can either build up the deposits themselves without having to scrimp and save for ten years and more or that the burden on the Bank of Mum and Dad − where that is an option, of course − is much, much less.

"We urge first-time buyers − and their parents − to take a good look at shared ownership, to find out what it is and how it works because it really can be a much more affordable and quicker way of getting on to the property ladder."

With shared ownership, you buy between 25% and 75% of your new home rather than buying it outright and pay a low rent on the remaining share. How much you buy depends on how much you can afford with a typical amount being around 40%.

"It's a shame more people don't know about this part-buy, part-rent path on to the property ladder and that includes parents because they often play a key part when their children decide to buy," says Bev. "That's why we decided to create a special pocket-sized leaflet, Shared ownership questions − from the parents' perspective, that answers some of the most frequently-asked questions about our part buy-part rent scheme."

Claraine keys1
First-time buyer Claraine (pictued above) highlights a lower deposit as one of the key pluses of shared ownership and recommends the part-buy, part-rent option to other first-time buyers. Like a lot of younger people on lower incomes, 22-year-old Claraine had just about given up hope of getting on to the property ladder after many months of searching and frustrating knock-backs from mortgage lenders.

That only changed when she found out about shared ownership − and in February moved into her new home at Cannock, Staffordshire, after putting down a £6,000 deposit she had saved herself and buying a 50% share for around £60,000.

"Shared ownership is definitely the most affordable way of buying a house if you have a low income and can't afford the deposit that lenders ask for on the open market," says Claraine, who works as a Moneymates Team Leader with Bromford Support, helping vulnerable customers to manage their financial affairs.

"Many of my friends − especially couples moving out of their parents' home for the first time − go into renting as a short-term solution, hoping it will give them time to save a bigger deposit, but then find it too costly to do so. I always recommend that anyone like me should consider shared ownership as the first option. It's quicker and easier to buy and it can be cheaper on a monthly basis than renting from a private landlord."

The Shelter findings support a call by the National Housing Federation for the government to boost the number of homes being built in Britain. Bromford supports that call and is using the surplus generated by a few outright sale developments to help subsidise the cost of building more shared ownership housing.

* Figures published by the NHF during Shared Ownership Week 2013.

** £31,250 represents a minimum 25% share of a one-bed apartment with a market value of £125,000. The deposit, based on a customer borrowing 95%, would be £1,563. The minimum 25% share of a three-bed home would cost £57,500 and the deposit, based on a customer borrowing 95%, would be £2,875.

25 July 2013