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Home Ownership: Who Benefits?

Publish date: 2nd September 2010

Of course it’s important to point out that all of our existing homeowners (apart from the first 50 or so people that we helped – they’re under a different mortgage arrangement) are locked in to an exceptional deal that guarantees the rate our lender charges will never exceed the SMI (Support for Mortgage Interest) benefit that they receive. This means that none of our existing buyers will notice any changes to their arrangement as long as their circumstances remain the same. However the current Government is now changing the SMI rate, which will have an impact on all future buyers.

As you may know SMI benefit has been fixed at the generous level of 6.08% since January 2009. As of 1st October 2010 this will fall to and then track the Bank of England’s monthly average mortgage interest rate (currently 3.63%). This is a big change and it takes the SMI rate far below an acceptable level for lenders, all of whom are also being squeezed by a general lack of funding and a tightening of the regulations being imposed by the FSA. As we’ve previously indicated the result of all of this is that there will now be a shortfall between the SMI rate and the rate at which a lender can profitably loan money. Whilst this shortfall will need to be met by buyers we’ve carefully analysed the figures and are happy that home ownership will continue to be an affordable, not to mention life changing, option for many people.

We’re therefore working hard with our main lender and the Housing Associations who support our buyers to finalise the details of an innovative new mortgage product that will enable us to continue helping people turn their hopes into a home of their own. We’re currently looking at a mortgage rate of 6.08% which, based on a £100,000 mortgage, will leave a shortfall of just £47.12 per week (or £23.56 on a £50,000 mortgage). This represents exceptional value, the best on the market in a like for like comparison. Only six national lenders currently support shared ownership purchases and their rates are currently as high as 7.89%. There are lower rates available but they all require significant deposits (up to 25%), which few people can afford.  Crucially we’re also committed to putting in place robust safeguards that will uniquely protect our buyers against any unforeseen and significant rate rises for the lifetime of their mortgage. Their long term security has always been – and will always be – our number one priority.

This is a new era for all of us. There will be changes and challenges to face. But we’re determined to ensure that people with a disability continue to have the opportunity to buy their own home. We’re pulling out all the stops and are aiming to have our new mortgage product in place as soon as w/e 17th September. In the meantime if you have any further questions or concerns please don’t hesitate to contact us.

The MySafeHome Team  

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