More than three million potential homeowners have missed the opportunity to possess a house since the financial crisis in 2008, has discovered new research by Pepper Money.
The specialized mortgage provider identified that the financial trends before the crash were continued, 3.3 million more households were expected to buy a house.
The findings emerged in a white paper, Shared property – An essential bridge to the housing market. It also revealed how shared ownership plays a crucial role in tackling the UK’s home crisis and offering an essential route on the real estate ladder for thousands that would otherwise have been priced.
Rob Barnard, intermediary relationship director at Pepper Money, said: “For many people nowadays, the dream of owning a house feels more and more out of reach. So much so that our paper estimates that 3.3 million households have missed the housing market since the financial crash.
“House prices have risen, wages have not kept pace and the costs of rental make saving for a deposit more difficult than ever. That is where shared ownership comes in, and we believe that this should be an option for more people.”
What is shared property and how can it help buyers for the first time?
Shared property is a way for people with a small down payment and lower income to get to the real estate ladder. Buyers buy part of the property and rent the rest. This means that they only have to punch a down payment for the percentage they buy. Moreover, they will also require a smaller mortgage, so affordability is not such a big obstacle.
According to Pepper’s white paper, 25 money lenders now offer shared mortgage from ownership. There has also been an increase in demand for these products, because, according to the pandemic, higher costs of living, interest rates and the uncertain economy have made it harder to gain access to mortgages.
Pepper Money indeed reported an increase in shared ownership loans of 21%last year alone.
Barnard added: “The pressure with which households are nowadays confronted for a growing number of people in more complex financial situations – not because they are irresponsible, but because life has become less linear. And shared ownership, those who navigate through the complications of life with resilience and ambition must.
“Our shared borrowers of the shared ownership are a good example. In 2023 to 2024, their average family income was £ 55,000 in apparently above the estimated market-wide figure of £ 37,000 in 2024.
“They are older, more likely to buy as couples, and are in a strong position to adjust their financial obligations, even in an environment with a high inflation. What is more, 50% of Pepper’s lending last year concerned customers without unfavorable credit ditness of customers who are simply outside the main street fungus.
“And yet Rigid Box check would see that many of these people would turn away. We believe that it is neither honest neither sustainable-and that belief is what our white paper has fueled.”
How shared ownership ‘the affordability gap’ bridges’
Pepper’s white paper emphasized that the considerable affordability gap has helped to bridge the ownership. This is what it has found:
In 2023 to 2024, the average buyer of the shared ownership purchased an interest of 40% in a house worth £ 313,100, whereby a down payment of £ 22,800 was deposited and £ 99,200 borrowed.
For comparison: the average first buyer in England stands for a deposit of £ 68,600, more than three times higher, and a mortgage advance of £ 223,000. In London the deposit gap is even wider and reaches £ 155,000.
Pepper signs that the growth in the market for shared ownership is partially powered by economic pressure. Between 2001 and 2007, the house price ratio rose from 5.1 to 7.8, powered by low interest rates, strong economic growth and population growth (see graph 2). This shift transformed the route to the homeowner, making a term of office as shared ownership essential.