Women turn to shared ownership after rejection from banks

NEW YORK: Older borrowers sidelined by mainstream banks are turning to shared ownership schemes, leaving them with the unwanted prospect of never fully owning their home.

Shared ownership lets borrowers buy a portion of a property and pay rent on the remainder. It is designed for first-time buyers but has increasingly been used by former homeowners who no longer qualify for a traditional mortgage.

In some cases older borrowers have been forced to turn to such schemes. Last year 28pc of all shared ownership customers were over 40, up from 23pc a decade ago, according to the Ministry of Housing, Communities and Local Government.

One buyer, Stuart Macklin, 44, from Berkshire, had no option but to use shared ownership after selling his family home and moving in with his parents following a divorce.

Despite never missing a payment on his previous decade-long mortgage Mr Macklin was rejected by high street banks for a traditional home loan on the basis of his credit score, which had fallen since his divorce.

Mr Macklin said: “Having been stuck in such a bad situation for so long, I was finally in a place where I could rebuild my life. But I felt that I was being judged unfairly.”

In some cases, retirees have turned to the scheme after being rejected by mainstream lenders. Specialist lender Together said its oldest shared ownership customer last year was 73 years old.

But borrowers in and approaching retirement may never be able to fully own their home if they buy a shared ownership property. Once an applicant hits 55, they only qualify for so-called “older people’s” shared ownership.

While this mostly works in the same way to the standard scheme, borrowers can only ever buy up to 75pc of their home.

Once they reach this mark, they no longer have to pay rent on the remaining share, but they will never be able to own their home outright, with the remainder belonging to their local housing association.

Sweeping changes will be made to shared ownership from April, when users in England will be able to buy portions of their home in 1pc increments rather than the current 10pc.

The threshold for buying will also be lowered – prospective buyers will be able to purchase just a 10pc share of such a home to qualify, down from the current 25pc benchmark.

Sundeep Patel, of Together, said: “Changes to the Government’s scheme may encourage an increasing number of older borrowers looking at shared ownership as an option, but it is disappointing to see so many lenders continue to drag their heels when it comes to offering this scheme”

Shared ownership has been a popular option for home buyers in recent years as wages have failed to keep up with spiralling house prices. However, it has often left buyers with higher mortgage interest rates, as well as punitive maintenance charges and contracts that are difficult to leave.

Mortgage availability is lower, and residents are also responsible for all maintenance costs, despite only owning a portion of the property.