David Castle: Conservatives should introduce the "rent a mortgage" scheme
David Castle, Director of the CTAB Mortgage Desk, offers his thoughts on current housing policy.
When Gordon Brown thought about calling a General Election I don't think he took the Conservative Party's stance on Housing seriously enough.
Stamp Duty is a stumbling block for so many first time buyers. Why? Because it is applied from day one at 1% for a property valued at £150,001, when this exceeds £250,000 then the 3% rule applies - even if the applicant is applying to buy 25% of the property!
The Labour Party are making the right noises on Shared Ownership but speaking as an FSA regulated Mortgage Broker working with various appointed Homebuy Agents we talk regularly with all the Lenders within the scheme and with others who have voiced their reservations about the scheme. They are not prepared to advance monies over or above the initial purchase price.
So from that perspective it makes the whole subject a misnomer.
Lets look at a typical example - a couple see a home valued at £260,000 their income allows them the affordability to borrow 25% of the purchase price £65,000 to this we have to add legal fees and the Stamp Duty of £650 or £7,800 - legal fees circa £800+. Why would they want to choose to pay the full Stamp Duty? Simply because if they buy an additional share at any time in the future the Stamp Duty will be based on the value of the property at that time so the "bill" could be appreciably higher to reach full ownership. Is it any wonder that the process comes to a grinding halt when the couple (most of whom are going to be first time buyers) are faced with high purchase costs?
Many will not have family members who are financially able to assist. Another cost to be borne in mind is that a Homebuyers' Report fee may have to be paid upfront and shared ownership, from a conveyancing costing point of view is a leasehold purchase - these always cost more than the traditional residential purchase. Another "double whammy" for the poor first time buyer.
The Government has gone on record stating that up to a further three million homes are to be built by 2020. If this programme commenced on the 1st January 2008 it would mean building 250,000 properties per annum. Or 684 completions per day - a logistical non starter. I believe it would make far more sense for them to introduce Social Homebuy across the board (All Registered Social Landlords) and ring-fence the capital receipts for Social Housing new build (as did Sir George Young).
Or even better - reintroduce the excellent Conservative Party legislation 'Rent to Mortgage' - a scheme which was withdrawn due to "lack of take-up" - the reason for the lack of take-up was because it was introduced too early. When house valuations increased so did the number of applications but that coincided with "the experts" deciding: "too few completions, let's withdraw the scheme"!
Let's see it reintroduced.