Could rent-to-buy be a solution to the homeownership challenge?
As a nation, the UK is obsessed with the housing market. House prices, the cost of renting, how more people are renting now than ever before and how there just aren’t enough homes on this island to for everyone who lives here!
Various business and bodies support that obsession by calculating and publishing different surveys, reports and indexes on all of the above and more.
With that in mind, a recent report from One Manchester and The Royal Society for the encouragement of Arts, Manufactures and Commerce on the housing difficulties faced by young people in Greater Manchester highlights the following:
1. That housing security is intrinsically linked to young people’s economic and personal security.
2. So called affordable housing for sale in and around the city is still too expensive for many young, hard working professionals with a good income.
3. Renting in the city isn’t always an option for those people in their first, or even second job.
The report also highlighted some recommendations to help solve the problems
· Develop a clear definition of affordable housing so it’s less subject to interpretation.
· Invest in and encourage more rent-to-buy schemes in the city.
· Create its own escalator ownership, perhaps where young people rent property at a reduced rate to allow them to save for the deposit to buy a home.
· Explore the option of creating a new minimum standard with mortgage providers and private landlords, when they run checks on mortgage applicants or potential tenants.
How can we change this?
These are all excellent recommendations that could help ease housing affordability. However, implementing many of these options would take time. In the meantime, there are millions of UK households who feel stuck renting, with no way of saving to buy their own place.
Perhaps there’s another timely way to solve this problem more urgently.
MortgageLadder is a homeownership platform that helps aspiring homeowners own quicker, through its digital coaching and rent-to-buy marketplace.
Rent-to-Buy is not a new concept. It’s been around in the UK for a good few years now and for those who have been suitable for such a scheme, they have achieved their home-buying ambitions. Rent-to-buy allows an aspiring homeowner move into the home of their choice without a mortgage, then buy up portions of the home in monthly instalment over time.
The ideal rent-to-buy homeowner would be:
ü People with a good job, but only a small deposit, (often due to high renting costs) that’s not big enough for the area the want to live in.
ü Those who don’t have a long-term or ‘good’ credit score, at least according to traditional banking practices.
ü People who have recently moved to the UK and haven’t got a banking and earnings history that’s in line with many mortgage application requirements.
ü Those who have recently secured a great job with a secure future and earnings growth potential, but due to the lack of a suitable job history have been asked to wait and come back in the future.
MortgageLadder uses the latest technology and an AI-powered digital coach to assess a Buyer’s affordability, improve their purchase readiness and where applicable, match them to the right home.
While rent-to-buy might not be the answer for everyone who wants to buy their own home; the support of a free digital coaching programme would be of benefit to many. The digital coach creates a personalised homeownership plan and guides a user through every step needed to build a deposit and a good credit score, quickly.
MortgageLadder’s mission is to help at least 50,000 of today’s 10.5 million renting households become homeowners within the next 5 years. If you want to be one of those 50,000 take a look at what they can offer and if they can help you achieve your homeownership goal.
About the Author
Founder, MortgageLadder. Passionate about all things Property, Finance and Technology. Ex Banker...