A new high LTV (loan to value) mortgage from Ecology Building Society aims to help more first time buyers struggling to step onto the property ladder.
The mutual’s Affordable Local Homes mortgage is designed for buyers of affordable properties through the Discounted Market Sale scheme. The fee-free product has a competitive variable rate of 5.54% and is available up to 95% LTV.
Less well-known than Shared Ownership, Discounted Market Sale Homes are properties discounted in perpetuity to act as a stepping stone for first time buyers.
They’re also only available to local residents, which helps communities to thrive and grow by ensuring people can stay in their local areas.
However, restrictions on such homes, while helpful to buyers, put off many mainstream lenders from offering mortgages on them.
“Most lenders are unwilling to offer home loans on properties with residence restrictions so this lack of mortgage choice risks locking first time buyers out of housing schemes created to help them” says Daniel Capstick, Ecology’s senior mortgages product and proposition manager.
“That’s particularly true of schemes aimed at enabling purchasers to stay in their local area where they have ties to family, friends and work.
“At Ecology, we believe being able to preserve these local links is an important part of building and maintaining sustainable communities, so we wanted to create a new product with a competitive rate to make it easier for more people to stay local as they step onto the housing ladder.
“Our Affordable Local Homes mortgage is designed specifically to support buyers of Discounted Market Sale Homes, whether that’s through Government schemes like First Homes, local authority projects subject to section 106 agreements, or community-led schemes by groups such as Community Land Trusts.
“This section of the first time buyer market is growing, but currently under-served by lenders, so we’re asking more mortgage providers to follow our lead and look at how they can support this customer group.”
Ecology’s Affordable Local Homes mortgage has an extended maximum term up to 35 years, no application fee or ERCs (Early Repayment Charges), as well as unlimited overpayment options, to make it as flexible as possible. The society also has cut its stress test rate to 1.75% as part of an ongoing focus on how it can help more first time buyers and offer solutions to affordability challenges.
Affordable housing accounted for 27% of all new homes in England in 2022/23, of which more than one in 10 properties were offered as Discounted Market Sale Homes.
A shortfall of affordable housing is part of the wider housing crisis in the UK, acknowledged by commitments from the current and previous governments to stimulate affordable housing growth.
