Q1 When are we making these changes?
The changes and our new affordable housing product range are effective from the 26th August.
Q2 Why are we now requesting a 5% personal deposit for shared equity applications?
This move brings us in line with our competitors. Feedback suggests that clients have, and expect to pay a deposit when purchasing a home, but they are not aware of the associated costs when setting up a mortgage. The new range assists customers in this. There are no changes to the deposit requirements for shared ownership customers, these customers still require a minimum deposit of 10% of the share or 20% for new build cases.
Q3 How do I key these cases?
You must ensure that the difference between the loan amount and the purchase price reflects your clients 5% personal deposit, and the source of deposit correctly reflects this. Where your client may be receiving a builder or housing association deposit in addition to their 5% personal deposit, the source of deposit must be keyed as the customer's personal deposit and additional information submitted with the application stating that a builder/housing association deposit is also being supplied.
Q4 Why is it compulsory for affordable housing clients to have their mortgage on a repayment basis?
A repayment mortgage will allow a customer to begin to reduce their mortgage immediately, providing the customer with the opportunity to purchase a further equity stake quicker than if they had been paying only interest.
Q5 Does this mean that the maximum my client can borrow will be less?
No. Clients who take interest only or repayment are all assessed for affordability in the same way, so the amount they can borrow will not be impacted.
Q6 Will the standard product range be available to my shared equity & shared ownership clients?
No. By offering specific products for affordable housing clients it allows us to design products that specifically meet their needs.
Q7 Why are we only offering 2 & 3 year fixed rate products?
Due to the cost of funding, 2 & 3 year fixed products currently offer the best value to customers. In addition, feedback suggests this period provides the best balance between stability of payments and flexibility if your client's circumstances change. This will be continually reviewed to ensure we offer great value to your clients.
Q8 Will the changes affect pipeline cases, i.e. an application that has already been submitted?
These changes will only take affect for any applications submitted on or after the 26th August. Applications submitted before that date will be unaffected.
Public sector schemes
Q1 Why do the changes not apply to public sector schemes until the 10th September?
Clients who purchase through a public sector scheme have to go through a process which involves them passing the housing association's requirements before a full application is made to the lender. Therefore, there will be clients without a deposit who have already been approved for the scheme, or be in the process of being approved. Extending the period of time when these applications can be submitted enables these cases to proceed as smoothly as possible and prevents purchases falling through.
Q2 How will the process for this work?
Here's the process for keying public sector schemes only, between 26th August and close of business on 9th September.
- You must submit the case as if your client has a 5% personal deposit and on a repayment basis. A product must be selected from the affordable housing range (core range products will not be available for selection). If the case does not pass the credit score, the case must not be referred as the application has been declined.
- In the 'Additional Information' section prior to submission of the full application you must state that this is a public sector scheme and your client wishes to proceed without contributing a personal deposit and /or on an interest only basis.
- Our internal processing centre will update the application and apply the old terms, they will contact you once this has been actioned and issue a KFI for your clients following the old terms.
NB - the old terms will ONLY be honoured for public sector schemes. Any non-public sector cases should not be progressed on the old terms as they will not be honoured and your client may incur a valuation fee. No discretion will be applied where public sector applications are not submitted by the 10th September.