Society’s £100 million makes property ladder easier to climb

The Government’s Open Market Homebuy Scheme (OMHB) could be helping first time buyers onto the property ladder faster than others who have to rely on a conventional mortgage.

Yorkshire Building Society, one of four lenders participating in the Scheme, has already committed over £100 million to properties being bought through the Scheme, with the majority of borrowers being under the age of 30 years (54%). Teachers, medical staff and police officers are the most likely to apply for a mortgage through the Scheme, with almost half (40%) choosing to buy a property on their own rather than with a partner.

The Scheme, launched last October, is designed to help public sector key workers and other eligible individuals to buy a home in the area where they live and work, homes that had previously been unaffordable to them. The shared equity scheme allows applicants to buy a house of their choice with no deposit and a mortgage of just 75% of the property value. Full details of how the Scheme works are shown in the attached Appendix.

The average purchase price of properties bought through the Scheme is around £160,000 with mortgage payments based on a loan of just £120,000. This results in a monthly interest payment of £665 compared to a conventional 100% loan to value mortgage where the monthly interest payment would be £812.

With interest rates increasing, 87% of all first time buyers are choosing a fixed rate mortgage. Recognising this preference, Yorkshire is the only lender with a high street presence to offer a fixed rate mortgage through the OMHB Scheme. A fixed rate ensures borrowers, who may have stretched themselves to afford their mortgage, have certainty that their monthly payments will not increase for at least five years.

Yorkshire Building Society is also the only lender participating in the Scheme that allows applicants to use their branches where fully qualified mortgage advisers are available for face to face advice. Taking the first step into the world of mortgages can be daunting for anyone, but possibly more so when considering an unconventional mortgage such as OMHB. Yorkshire provided comprehensive training to its specialist OMHB advisers to ensure they can guide and support applicants through every step of their house buying process.

The Scheme is available throughout England and Wales, but unsurprisingly it is most popular in London and the South East (71%), as rising house prices have made it particularly difficult to buy a property in these areas.

Previous research from Yorkshire Building Society indicated that whilst there are lots of trendy new apartment developments aimed at first time buyers, most people trying to get their first foot on the property ladder prefer older properties. Almost half of those taking out an OMHB mortgage bought a terraced house (45%) with less than a third choosing a flat (29%).

Andy Caton, of Yorkshire Building Society said “The OMHB Scheme is very close to our building society origins of helping people into homeownership. We are therefore delighted to be one of the main providers of this Government initiative which is helping key workers get on the property ladder in areas where house prices have spiralled out their reach.

“Despite a slow start to the Scheme, which is due to the process of confirming customer eligibility, OMHB has now taken off at a more rapid rate than we had anticipated. It is a great success for the Society with properties to the value of £115m being bought through the Scheme. Our fixed rate option is proving particularly popular in the current rising interest rate environment.

“Whilst this Scheme is not the solution for all first time buyers, it is giving support to many individuals who need it most. Innovation in mortgage design is continuing to address the needs of other first time buyers, and each scheme is a step in the right direction.”