Last updated: 4 September 2017
At a glance
- This overview highlights the main types of schemes and approaches taken by the UK’s national governments to support households into Low Cost Home Ownership (LCHO), also known as the Intermediate Market.
- The most common approaches backed by government funding programmes include
- Shared ownership scheme
- Shared equity schemes
- E.g. current Help to Buy: Shared Equity schemes , as well as the Scottish Government’s Low-cost initiative for first-time buyers (LIFT) equity loan schemes.
- Statutory purchase schemes
- Affordable housing statistics are published and maintained for England, Scotland, Wales and Northern Ireland.
- Existing Right to Buy (RTB) discounts and rules are set to be extended to housing associations in England, to deliver a Conservative Party General Election 2015 manifesto pledge. Implementation of this will require legislative changes, including to charity law as many of the affected housing associations are registered charities.
- In addition to LCHO schemes, there are guarantee schemes HTB: Mortgage Guarantee and NewBuy which involve government-backed guarantees to encourage higher Loan-to-Value (LTV) lending.
- Tabs on this page provide a summary of the main current schemes in England, Scotland, Wales and Northern Ireland, as well as a summary of past or legacy schemes, some of which are still reported in official statistics.
- We recognised in our CML manifesto 2015 that the intermediate market and shared ownership in particular, is becoming a permanent tenure rather than a step to full ownership.
- We call on government and policy makers to maintain focus on core established models for shared ownership and shared equity, which are proven and acceptable to lenders.
- In shared ownership: lenders expect the standard lease with minimum share purchase and mortgagee protection.
- In shared equity: lenders expect the “Mortgage Market Review (MMR) compliant” help to buy approach.
- Any innovative approaches should be capable of delivering scale and volume and include key elements lenders need and expect to see, such as the standard model lease in shared ownership, and the “MMR compliant” approach for shared equity schemes where the equity stake does not fall to be repaid until after the expiry of the main mortgage.
- Extending RTB to housing associations raises a number of issues for CML members, who are commercial funders to the housing associations concerned. We await full details of the proposals to become available.
Why this is important for lenders
Low or reduced costs home ownership schemes in the intermediate market are an important way in which government and the mortgage lending industry can support low to middle income households into home ownership.
LCHO schemes are vital in tackling affordability challenges for many households, particularly in higher value areas. For governments, it is a high priority to increase new housing supply through these schemes, and there are strong expectations on the lending community to support this market.
The proposed extension of Right to Buy to housing associations on social housing funding and regulation will raise issues for CML members as commercial funders of the housing association sector.