Lenders are cutting the cost of shared ownership mortgages, with new fixed and variable 95% deals offering rates below 3%.
Here, we reveal the best shared ownership home loan rates available today and consider the advantages and disadvantages of purchasing with the government scheme.
Smaller lenders cutting shared ownership mortgage rates
Shared ownership – a government scheme which lets you buy a share of 25-75% of a property and pay rent on the rest – is a well-liked option with first-time buyers struggling to jump on the ladder through the normal routes.
In the final week, smaller lenders have been cutting the cost of their shared ownership mortgages.
First of all, Loughborough Building Society made its 95% range cheaper, slicing the speed of its two-year discount mortgage to a market-leading 2.69%.
Next, Newbury followed suit with rate cuts on three- and five-year fixed-rate deals.
Finally, Hanley Economic launched a fee-free two-year discount shared ownership mortgage at a rate of two.89%.
Which lenders offer shared ownership mortgages?
From this, you may think shared ownership deals are just available from smaller building societies, but this isn’t the situation.
Some providers offer specific deals for individuals using shared ownership schemes, while some open up some of their standard residential products.
Right now, 27 lenders offer mortgages for buyers using shared ownership schemes, with 19 offering 95% LTV mortgages to buyers with a 5% deposit.
You can use the interactive table below to find out which lenders offer shared ownership mortgages.
Cheapest shared ownership mortgage rates
As with standard residential loans, shared ownership mortgages are primarily offered in three different categories:
The tables below show the cheapest initial rates available to first-time buyers with a 5% deposit. Links take you to further information on the deals which? Money Compare, the Which? comparison site.
Best fixed-rate shared ownership mortgages (95% LTV)
| Type of mortgage | Lender | Initial rate | Revert rate | APRC | Fees |
| Two-year | Barclays | 2.88% | 4.24% | 4.1% | None |
| Three-year | HSBC | 3.29% | 4.19% | 4% | None |
| Five-year | Barclays | 3.32% | 4.24% | 3.9% | None |
Best variable-rate shared ownership mortgages (95% LTV)
| Type of mortgage | Lender | Initial rate | Revert rate | APRC | Fees |
| Two-year discount | Loughborough | 2.69% (SVR minus 2.65%) | 5.34% | 4.9% | None |
| Three-year discount | Melton Mowbray | 2.79% (SVR minus 2.2%) | 4.99% | 4.6% | None |
Shared ownership: the basics
Shared ownership schemes are a popular way for first-time buyers to get on to the property ladder having a 5% deposit.
The schemes are operated by housing associations, which let you purchase a share of the property (theoretically as little as 25%, but often much more) and pay rent on the remainder. Buyers may then ‘staircase’ to full ownership by purchasing further shares at a later date.
Shared ownership properties are leasehold, so you’ll should also pay something charge for maintenance of common areas.
To use shared ownership in England, you’ll call for a household salary of under lb80,000 if you’re buying outside London, or lb90,000 in London.
Shared ownership schemes also exist elsewhere in the united kingdom, with various eligibility criteria in Wales, Scotland and Northern Ireland.
Shared ownership mortgages: what you need to know
If you’re buying a shared ownership home, you’ll first have to pass checks through the housing association to make sure you’ll be able to afford the rent portion of your monthly repayments.
Once that’s done, you are able to apply for a mortgage in the same way just like you were purchasing a home on the regular market.
The huge difference with shared ownership is the fact that lenders will require into account the rent you’ll be paying on the portion you don’t own and also the monthly service charge when assessing what you can afford.
If the general monthly repayment is much more than 45% of your income, you may find it difficult to pass these checks.
Monthly costs can spiral
Shared ownership costs may appear low initially but could spiral significantly.
Let’s take a look at an example of a property now available on the Share to purchase website.
A two-bedroom apartment in Walthamstow, London costs lb500,000 – having a minimum share of 25% (lb125,000).
With a 5% deposit, you’ll need to put down lb6,250 (5% from the lb125,000). You’ll then need to get a home loan for the remaining lb118,750.
While that might sound affordable, Share to Buy estimates your overall monthly cost is a sizable lb1,641 – comprising a home loan of lb626, something charge of lb156, and rent (for that remaining 75% of the property) of lb859.
Alternatives to shared ownership
If you’re looking to buy the first home, it’s vital that you assess all your options before rushing in.
For some buyers in expensive areas, shared ownership could make sense, but others may be better off taking a different route. Two popular alternatives are:
