Homebuyers seeking to purchase property under the Government’s new shared equity initiative risk losing out if the property market picks up, warns the Law Society.
The Government’s revised equity share scheme allows vulnerable families who are no longer able to keep up with their mortgage repayments the chance to sell their home and rent it back, or to enter into a shared equity or shared ownership scheme on the property.
Paul Marsh, President of the Law Society, says:
“While any move by the government to tackle to troubled housing market is welcomed, we are concerned that if the market picks up those homeowners in the scheme will be losing out as they will have a smaller proportion of the property’s equity.
“This is a very short-term solution which runs the risk of leaving many homeowners on lower incomes in these equity share schemes trapped. Sharing the equity also means sharing the sale proceeds of any eventual disposal. If a homeowner has a 50 per cent share, they will only get 50 per cent of the value.”
The Law Society is concerned that those entering the scheme are not fully aware of all the dangers.
Paul Marsh says: “On the face of it, it looks appealing to those in need of help with their mortgage in the current downturn. However, it is essential that they get some legal advice as to the implications of the scheme and advice on other alternatives.
“There are many solicitors out there who can advise on equity sharing, and consumers should get legal advice before taking up the new scheme. The scheme might seem a good idea at the time, but could prove costly in the long term.”
The Law Society has welcomed the move by the Government to suspend stamp duty on properties worth £175,000 or less for one year. However, the Society fears it might be too little, too late.
Paul Marsh says: “Finally, we have some certainty in the market. The Law Society has been pressing for the burden of stamp duty land tax to be alleviated for many years. Now it seems the Government has waited until the last moment to listen.
“Everyone looking to buy was holding their breath following recent suggestions there would be a suspension. At least now everyone knows where they stand. It might be too little, too late. The Government has spent far too long dithering on initiatives that have failed to help the market, such as Home Information Packs.”