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Brokers question moves to restrict shared equity mortgages

The recent move by major lenders to restrict access to shared equity schemes is a sign that lenders are starting to wean themselves off Help to Buy

Brokers believe the recent move by two major lenders to stop home movers from accessing shared equity mortgages may be a sign that lenders are beginning to wean themselves off Help to Buy.

Earlier this month, Halifax Intermediaries decided home movers would no longer be able to access its shared equity and shared ownership products, including Halifax’s Help to Buy equity loans via brokers. Home movers can still access Help to Buy mortgage guarantee products.

Announcing the move, a spokeswoman for Halifax Intermediaries says: “We have recently taken the decision to temporarily offer shared equity and shared ownership mortgages to first-time buyers only through the intermediary network.

“We remain fully committed to supporting first-time buyers and the affordable housing sector. This prudent, short-term change reflects that Halifax currently holds about a 50 per cent share of this market.”

Though Halifax claims this is a temporary policy, it has not said when it will resume offering shared equity and shared ownership products to home movers.

Nationwide soon followed suit and stopped accepting shared equity applications from home movers last week. The lender has not said for how long it will maintain this policy. 

A Nationwide spokeswoman says: “We are responding to the earlier move by Halifax to end the sale of its Help to Buy equity loan products to subsequent buyers via intermediaries.

“Nationwide will continue to lend to first-time buyers under the Help to Buy initiative. The market continues to be served by a number of other lenders.”

The rationale

London & Country associate director of communications David Hollingworth says: “Halifax Intermediaries and Nationwide are the biggest lenders in the shared equity space so perhaps they want to limit their exposure to that kind of lending.

“It is an interesting move because figures show the vast majority of borrowers through Help to Buy are first-time buyers, which limits the effect. Removing first-time buyers as well would be more drastic, but this has pegged back volumes a bit at most.”

Your Mortgage Decisions director Dominik Lipnicki says the lower risk profile of borrowers on the Help to Buy equity loan scheme, who already pay higher mortgage rates, makes the decision to curb this type of lending questionable.

He says: “Let’s be frank, it’s a strange move as this market sector is very low risk. Borrowers on Help to Buy schemes are already paying rates around the 5 per cent mark, so the exposure when the scheme ends is far less than other borrowers.

“The mass hysteria around shared equity and Help to Buy is regrettable because there is such little activity at the moment in those areas. But the option should still be available.” 

Santander and NatWest say they currently have no plans to curb shared equity lending, while Barclays declined to comment.

A spokeswoman for Santander says: “In the first half of the year, we have seen strong demand for our Help to Buy products across the UK, and expect the demand to continue as awareness of the scheme builds.”

A spokesman for NatWest says: “We currently accept applications from intermediaries’ customers who are first-time buyers and existing homeowners for both Help to Buy schemes. As with all aspects of our business, we will continue to monitor and review the market.” 

Lipnicki says: “The Government says it is committed to the scheme and repossessions or arrears are minimal, so I am not sure where the move to restrict shared equity loans came from. I am glad to hear others will not follow suit, particularly when Nationwide has given very little reason for the move other than the fact that Halifax did it. That is extremely regrettable.” 

Implications for Help to Buy

Blue Strawberry Mortgages principal Ross Robinson says the two biggest lenders in the UK taking this decision may be the first sign that lenders are weaning themselves off Help to Buy.

He says: “Another angle could be that, with the UK housing market where it is, lenders might be starting to wonder how much of a need there exists for shared equity deals for home movers.

“If someone already owns their home, the chances are their equity has been rising for some time and so they would not need this assistance. Perhaps lenders are recognising the scheme is not as desperately required as people thought last year. The market is rampant at the moment and the number of transactions through Help to Buy is minimal.”

Hollingworth says: “The key thing here is home movers will no longer be presented the option to take up the Help to Buy equity loan through Nationwide or Halifax. That side of it is definitely interesting – that two of the biggest lenders in the UK would effectively cut off half of those eligible for the equity loan scheme.”

Lipnicki says there is still a need to ensure the market for shared equity mortgages is a competitive one.

He adds: “It is absurd to me because this is a low-risk part of the market that still needs to be served. Borrowers coming off a two-year rate at 1.99 per cent may need to look at every option when those deals end, including shared equity.”

Help to Buy equity loan scheme – In numbers

22,831

Total completions as at 31 May

86%

Percentage of loans granted to first-time buyers

£206,084

Average purchase price

Source: Department for Communities and Local Government

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Something really fishy about these guys pulling out. I don’t buy the whole “our market share is too big” argument, since up until 31st May there were only about 3,000 Help to Buy mortgages taken out by home movers in the last year out of the +700,000 mortgages approved overall. These figures just aren’t big enough to even make more than a rounding error on their balance sheet.

    And if they were worried about risk they should be pulling them for first time buyers (who are far more risky) rather than home movers (who already have capital in a property).

    This feels an awful lot like they’ve been pushed to do this rather than making the decision themselves.

  2. Chris—Halifax and RBS do act under “advice” from their major shareholders (Mr Cameron and Mr Osborne) but I would suspect that Nationwide doesn’t like the look of too many borrowers picking up another 20% of purchase price on the likely affordability within the next 5 years.
    On the usual premise of the government trying to solve one problem but causing about 10 accidental ones I think they’ve made a smart move.

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