Do things by halves to get a foot on the ladder

As high prices continue to leave home ownership out of reach for many people, schemes for splitting the costs could stop the market stalling. Esther Shaw reports
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The barriers have come down on the stampede for bricks and mortar in Britain, with property ownership now a distant dream for many young people. Even though prices have shown signs of stalling and falling across the country, the cost of buying a first home is still pushing the housing ladder out of reach.

The barriers have come down on the stampede for bricks and mortar in Britain, with property ownership now a distant dream for many young people. Even though prices have shown signs of stalling and falling across the country, the cost of buying a first home is still pushing the housing ladder out of reach.

Figures from the Council for Mortgage Lenders (CML) show that while first-time buyers accounted for nearly half of all mortgage lending in 1999, it is predicted that this year it will be little more than a quarter.

This poses problems for the property sector as a whole - without new blood, chains cannot be created and the market cannot be sustained over the long term.

"There is a real need for activity in the first-time buyer market," says Alan Dring from Standard Life Bank. "Lenders have got to find ways of overcoming the affordability problem to stimulate this activity once again."

The obstacle to this is that the average property in the UK now costs over £150,000 - more than five times average earnings. So young people face living in the parental home, or rented accommodation, for years as they wait to buy a place of their own.

The good news is there are already a number of schemes aimed at making the first property purchase easier.

New research from FirstRungNow, a website aimed at helping potential buyers take that step, suggests more people consider alternative ways of getting started. "Two increasingly popular options for would-be owners are shared ownership and joint ownership schemes," says Helen Adams, director of the website.

"The former involves buying with a housing association or housing trust, and the latter involves buying with a friend."

Figures from FirstRungNow show that more than one in 10 first-timers are now clubbing together with friends to buy their first home. The advantage of this is increased spending power for a property and shared funds to pay for the deposit and stamp duty, as well as legal, survey, valuation and administration fees.

Most bank and building societies will lend 2.5 times joint income - compared with three or four times income if you buy on your own.

Some lenders will allow as many as four names to appear on a mortgage agreement - although many of these will only take two salaries into account. However, in July this year, Britannia building society launched a "share to buy" home loan for first-timers that enables up to four young professionals to pool their resources and buy a property at a multiple of three times each of their salaries.

When they come to sell up, the distribution of the proceeds will depend on how much each person contributed to the deposit at the start.

"This is designed to help raise the affordability for first- timers," says Britannia spokes- woman Lise Bulloch. "It also provides a structure for people buying together in as fair and equitable a manner as possible."

If you enter into joint ownership, you can opt for one of two types of tenancy.

Cohabiting couples usually choose joint tenancy, where the partners hold equal stakes and neither can sell without the other's agreement - except by a court order.

But if you are a young couple, or buying with friends, you may be better off considering a tenancy in common, where you do not have to own equal amounts and can dispose of your share as you wish.

If you do enter into a joint ownership, be realistic about the commitment you are taking on. "If partners or friends fall out and one of them refuses to pay their share of the mortgage, the lender can chase all parties for payment of the shortfall," says Mr Dring at Standard Life Bank.

This is why you should draw up a contract or deed of trust with a solicitor to ensure your investments are protected. This will set out the share of equity held by each person and how the finances will be split in the event of the property going on the market, someone wanting to move on or a relationship breaking down. This is especially important if one person is putting down a bigger share of the deposit, or paying a larger chunk of the mortgage.

A shared ownership scheme allows you to purchase a home - often a new-build property - in conjunction with a housing association. You buy a percentage of the property and then rent the rest from the association at a low rate - with the option of buying that stake at a later date.

"This sort of scheme is popular with key workers, such as teachers or nurses and those unable to raise a deposit," says Ms Adams at FirstRungNow. "This is because you can often take a 100 per cent mortgage."

She urges new buyers to seek professional guidance before signing up to either of the schemes. "Both offer first-timers the chance to share some of the initial costs and legal fees," she says. "But they are very different in terms of legalities and practicalities, so you should seek expert advice."


Fay Murphy and her fiancé, Alan Ball, have joined a shared ownership waiting list in a bid to get themselves on to the property ladder in Basingstoke, Hampshire.

Fay, 27, a project administrator, says high asking prices are making it hard to buy outright, and that problem is exacerbated as they are both self-employed, which makes it more difficult to get a mortgage.

"We had been living together in rented accommodation for several years," says Fay. "But we were evicted when the landlord got permission to develop the property, and we moved back home to live with Alan's parents."

The couple have put themselves on the waiting list held by their local housing association, run by Basingstoke and Deane borough council.

Fay says the average property price in the area is £130,000. "This is quite high. That's why we've signed up to the shared ownership scheme: it will give us the chance to get on to the ladder without being over-burdened from the start.

"We will also have the chance to buy more and more of the property as time goes on."

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