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Shared ownership offers hope for first-time buyers as affordability gap grows

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Shared ownership offers frustrated home buyers a ray of hope at a time when many of them are said to be stuck without any real prospect of ever getting on the housing ladder.

Bev Hall, Sales and Marketing Director of Bromford Homes, highlights HomeBuy* shared ownership in the wake of a hard-hitting National Housing Federation report that charts the growing affordability gap for thousands of first-time buyers.

Figures gathered by the Federation create a grim picture of the plight facing many first-time buyers and ordinary families across the West Midlands, with the cost of buying your own home soaring by more than three times the rate of an average salary over the past ten years.

According to the Federation, home buying hopes in the West Midlands are frustrated by a 45 per cent increase in the gap between house prices and wages between 2001 and 2011.

At the same time, getting a mortgage is said to be a lot harder, with the amount of deposit needed for a traditional outright sale in Staffordshire - one the region's worst-hit areas - rising by 367 per cent.

Bromford Homes property expert Bev Hall welcomes the report for the clear and punchy way it highlights the problem facing so many first-time buyers - and in particular the much larger deposits needed for a typical mortgage when buying a home outright.

She said: "We share the Federation's view that it has been getting harder for thousands of people to buy a home of their own. And we support the Federation's call that we, as a nation, need to start building more homes that ordinary hard-working people can truly afford.

"The figures quoted by the National Housing Federation speak for themselves - and one of the most telling numbers is the deposit that first-time buyers have to come up with for a typical mortgage on a typical home.

"That's why we believe HomeBuy shared ownership has such an important role to play and offers many frustrated first-time buyers a real ray of hope.

"Shared ownership remains a really affordable alternative for first-time buyers. Rather than buy a property outright, it allows people to buy anything from 25 per cent to 75 per cent of a new home and get that all-important foot on the property ladder without having to find a really huge deposit.

"It's made the difference for many, many first-time buyers and continues to offer an affordable solution at a time when the gap between incomes and house prices is high and getting a mortgage is that much harder.

"In fact, we are starting to see more applications from people who, before the credit crunch, would probably have been able to buy outright.

"These are typically young working people who for time being can only afford the five or ten per cent deposit needed for a 25 or 50 per cent share in one of our shared ownership homes.

"In the longer run, however, they are people that are more likely to progress in their careers, to increase their earnings and to staircase their share and, in time, to possibly buy outright."

The National Housing Federation's research found that in 2001 the average price of a home in the West Midlands was £95,015, and the average salary was £15,636.

Over the next ten years the price of a home rocketed to £171,707 - an increase of 81 per cent - whereas wages rose just 25 per cent to £19,531.

The ten worst-hit areas highlighted in the West Midlands include Telford and Wrekin, Sandwell, Dudley, Wyre Forest and more than half the Staffordshire boroughs.

Turning to deposits, the Federation says that ten years ago the deposit for a typical 90 per cent mortgage (available in 2001) on a traditional outright sale was £9,502. By 2011 the amount banks were willing to lend was less, and so the deposit needed for a typical 75 per cent mortgage leapt to £42,927.

Announcing the figures, Gemma Duggan, West Midlands lead manager for the National Housing Federation, said: "These shocking figures show that it is getting increasingly hard for thousands of people in the West Midlands to buy a home of their own in the current climate.

"Staffordshire Moorlands makes it into the top ten nationally for parts of the country that have seen the gap between income and house prices growing the most. It's no wonder that people can often feel like they have to win the lottery to be able to buy in their local area.

"A shortage of homes means the price to buy them is being pushed ever higher by the market, and out of reach of millions of hard working families. Unless we start building more homes people can truly afford, to match the demand, this will only get worse."

* Homebuy enables people to purchase between 25 and 75 per cent of a home and pay subsidised rent on the remaining share. Buyers can increase that share through a process known as staircasing and even buy their home outright when - and if - their finances allow. 

Bromford shared ownership developments

We have around 20 shared ownership developments across central England, check the Bromford Homes website for more information.