Shared equity schemes: evaluation reports

5. Buyers' experience of Shared Equity schemes

This chapter summarises buyers' experience of shared equity schemes to date, including the extent to which the schemes had an impact on housing outcomes for buyers. Findings draw on survey results, including written (free text) responses from the buyer survey, and qualitative findings from telephone interviews with buyers.

Housing search patterns

Buyers were asked a series of questions around their property search patterns prior to buying through the Scottish Government shared equity scheme, including the range of tenures considered and whether buyers had been mainly looking for a newly built or existing home.

A large majority (95%) of respondents had considered buying. This was higher for those who purchased through HtB; 98%, compared with 84% of NSSE and 90% of OMSE buyers.

The vast majority indicated that home ownership was the only tenure option they had considered; 91% of HtB, 80% of NSSE and 76% of OMSE buyers. For NSSE and OMSE buyers who had considered other tenure options, the most common option was social renting (14% of both NSSE and OMSE buyers). Buyers who lived in the private or social rented sectors when they were first looking to move were more likely to have considered these tenure options; 14% of private renters has considered remaining within the private renting sector (compared with 7% of other buyers), and 11% of social tenants had considered remaining within the social rented sector (compared with 5% of other buyers).

Base: HtB 2238, NSSE 121, OMSE 1072. Note respondents could select multiple options.

Just over four in ten respondents (41%) had considered either a new build or existing property, and a similar proportion (38%) had considered only a new build property. There were differences across the three shared equity schemes:

• HtB: Just over half of buyers had considered only new build (52%), although a substantial proportion had considered either new build or existing property (40%).
• NSSE: More than half had considered either new build or an existing property (58%), while just over a third (35%) had been considering only new build.
• OMSE: Just over half had considered only an existing property on the open market (54%), although a substantial proportion had considered either new build or existing property (41%).

Base: HtB 2239, NSSE 123, OMSE 1074

Qualitative findings were consistent with the survey results outlined above. Most participants felt that they had been clear in their housing search patterns from the outset, such that the decision to use a shared equity scheme did not have a significant impact on the types and sizes of properties being considered. Rather, participants emphasised that the option of buying through a shared equity scheme allowed them to consider better quality properties that were more suitable for their needs. Participants also highlighted the extent to which shared equity schemes enabled them to access ownership in the area or areas they preferred. Some indicated that their choice of specific shared equity scheme was influenced in part by the availability of developments in their preferred location.

Impact on housing outcomes

The impact of the shared equity schemes for buyers' housing outcomes was covered in the survey and interviews with buyers. The survey asked buyers the extent to which use of shared equity had an impact on the kind of property they were able to buy, the kinds of property they may have been able to buy without the shared equity scheme, and whether it would have taken them longer to buy a property without shared equity. Qualitative interviews with buyers explored these issues in further detail.

Buyer survey results

Buyers were asked a series of questions to assess the impact of use of the shared equity schemes on housing outcomes for buyers, including the difference that shared equity had made to their house purchase, the feasibility of alternative housing options if shared equity had not been available, and the impact of shared equity on when they were able to access home ownership.^[16]

Findings for buyers using Help to Buy are summarised below.

• a large majority (83%) agreed that HtB had meant they could buy a property sooner than would have been possible without assistance.
• Most agreed that HtB had enabled them to buy a larger property (72%) or a property in their preferred area (61%).
• Around a fifth (18%) agreed that they may have been able to buy the same property without HtB, although only 3% said they 'definitely' could have done so.
• Around a fifth (18%) of respondents agreed that they could have bought a property they wanted without HtB.
• Most may have been able to buy an alternative property, although a minority felt that they could 'definitely' have accessed alternatives; 28% 'definitely' could have bought a cheaper or smaller property without HtB, or a property in a less desirable area.

"I was able to get a better property that suited my needs for longer, and with more affordable monthly payments." HtB Buyer

Findings for NSSE buyers are summarised below.

• The majority (78%) agreed that NSSE had meant they could buy a property sooner than would otherwise have been possible.
• Nearly half (46%) agreed that they would not have considered buying from a social landlord without NSSE.
• Most agreed that NSSE had enabled them to buy a larger property (61%), but fewer agreed that NSSE enabled them to buy in their preferred location (47%).
• 17% agreed that they may have been able to buy the same property without NSSE, although only 2% would 'definitely' have been able to do so.
• A minority (14%) agreed that they could buy a property they wanted without NSSE.
• Most buyers may have been able to buy an alternative property without NSSE, although a minority (18%) felt that they could 'definitely' have bought a cheaper or smaller property, or in a less desirable area.

"It was an opportunity to own 60% of something, instead of 0% of nothing." NSSE Buyer

Findings for OMSE buyers are summarised below.

• A large majority (90%) agreed that OMSE had enabled them to buy a property sooner than would have been possible without OMSE.
• Most agreed that OMSE had meant they could buy a larger property (64%), and a more than half agreed that OMSE enabled them to buy in their preferred location (54%).
• Around a fifth (19%) agreed they may have been able to buy the same property without HtB, although only 4% indicated that they would 'definitely' have been able to do so.
• A minority (13%) agreed that they could buy a property they wanted without OMSE.
• Less than half felt they may have been able to buy an alternative property without OMSE, and a minority (12%) 'definitely' could have bought a cheaper or smaller property.

"I worked all my life and had been a homeowner before [a relationship breakdown]. Getting back on the property ladder wasn’t an option without the scheme." OMSE Buyer

There were also differences between buyer groups in their views of the impact of the shared equity scheme:

• First-time buyers were less likely than others to indicate that they could have bought a smaller or cheaper property that suited their needs without shared equity; 14% could 'definitely' have bought a smaller property (compared with 21% of existing buyers) and 16% could 'definitely' have bought a cheaper property (24% of existing buyers).
• Lower income households (up to £20,000) were less likely than others to have been able to buy a smaller property (5% compared with 17% of those with an income of more than £20,000) or a cheaper property (7% compared with 20%) without shared equity. Those where the Scottish Government acquired a larger equity share (30% or more) were also less likely to have been able to buy a similar property in a less convenient area (5% compared with 12% of those with a stake of less than 30%).
• Single parent households were less likely than others to have been able to buy the same property (12% could 'definitely' or 'probably' have done so, compared with 19% of those in other household types), a smaller property (53% compared with 66%) or a cheaper property (59% compared with 69%) without shared equity.

As figure 30 shows, a large majority of buyers (85%) felt that they could not have bought without shared equity (24%) or would have taken longer to buy without assistance (61%). This was broadly consistent across the three schemes (83% of HtB, 81% of NSSE and 89% of OMSE buyers). However, buyers using HtB were less likely to feel that they would have been unable to buy without the scheme (17% compared with 35% of NSSE and 41% of OMSE buyers). HtB buyers were more likely to feel that it would have taken them longer to buy (67% compared with 46% of NSSE and 48% of OMSE buyers).

Base: HtB 2168, NSSE 121, OMSE 1027

Impact of shared equity schemes - qualitative findings

The impact of shared equity schemes was also explored through qualitative interviews, and in free text written survey responses.

Buyer participants were very clear that use of the shared equity schemes had a positive impact on their ability to access suitable housing. These buyers indicated that shared equity schemes had enabled them to access a better quality of housing than would otherwise have been possible. This included HtB and NSSE enabling buyers to access new build housing that would otherwise have been out of reach, and OMSE supporting buyers to access better quality resale housing.

In discussing the quality of housing they were able to access, buyers referred to the suitability of housing for their needs (including size, layout, level of disrepair) and location (including with reference to schooling and family support networks). Buyers also emphasised that use of shared equity schemes had made home ownership a more sustainable housing option for them. This included reference to more affordable mortgage repayments, and some participants were of the view that the only feasible ownership options available to them without shared equity would require improvement works that they could not finance.

Satisfaction with shared equity schemes

Buyers were asked whether they had been satisfied with key aspects of their experience of buying through the shared equity schemes. Buyer satisfaction was high across all aspects of the process and highest for the application process in terms of its ease (92% satisfied) and the time involved (91%).

These findings were broadly consistent across the three schemes, although buyers who used HtB and OMSE were overall more likely to be satisfied than NSSE buyers. This was particularly the case for availability of information (where 88% of HtB, 87% of OMSE and 79% of NSSE buyers were satisfied) and getting answers to questions (where 84% of HtB, 91% of OMSE and 72% of NSSE buyers were satisfied). However, it should be noted that a majority of NSSE buyers were satisfied with all aspects of the process.

Base: HtB 2141, NSSE 121, OMSE 1011

Qualitative findings (based on interviews with buyers and free text written responses from survey respondents) were consistent with this positive picture of buyer experience. Participants typically referred to the process of purchasing with shared equity as "simple" and "straightforward". However, participants also suggested that their experience was dependent on support and advice provided by mortgage brokers, estate agents and/or solicitors. Survey respondents (via written comments) and qualitative participants referred to the mortgage broker and/or solicitor as crucial in ensuring they had a good understanding of the shared equity scheme and the requirements it placed on buyers. Many participants also noted that use of a broker and/or solicitor had minimised the burden on the buyer associated with the shared equity scheme. Others expressed frustration where they felt that their solicitor or broker's lack of awareness or understanding of shared equity had caused difficulties. This included some who noted that use of shared equity had increased their legal costs associated with the purchase.

The buyer survey and qualitative interviews both covered aspects of buyers' experience that had been difficult. The survey asked buyers to describe their experience in their own words, and a substantial proportion of respondents used this as an opportunity to reiterate their satisfaction with the shared equity scheme. Similarly, most qualitative participants commented positively on their experience of the shared equity scheme, and particularly the positive impact in terms of their access to the housing market.

However, written comments gathered through the survey, and qualitative findings from interviews highlighted common challenges or areas of concern across the shared equity schemes.

A perceived lack of clarity around the process of repaying the Scottish Government's equity share, including subsequent resale of the property. This included reference to fees and charging of interest on the equity share - there appeared to be some lack of clarity here around differences between the Scottish Government and UK Government Help to Buy schemes.^[17] Some suggested that information provided in advance of purchase could include a stronger focus on subsequent resale and repayment.

"I am a little concerned about paying the scheme back and when the most appropriate time to do this is. It would help if you could make small regular repayments without having an assessment each time." HtB Buyer

Some buyers felt they had difficulty accessing clear information on shared equity schemes when first looking to buy. This included reference to eligibility criteria, how use of shared equity schemes affected the purchase process, and arrangements for repayment and resale.

Buyers also referred specifically to a lack of clarity, and some frustration, around the requirement for buyers to seek permission prior to undertaking improvements or other changes to their home. This included some who had not appreciated these restrictions prior to buying, and others who had encountered difficulty securing permission for subsequent improvements to their home.

A number of buyers raised concerns around potential for use of shared equity to limit their options for re-mortgaging. This included some with experience of re-mortgaging who referred to limited lender options and suggested that use of shared equity had increased the cost of re-mortgaging (in terms of interest rates and admin fees).

"Better info in advance about the process [of remortgaging]. I have stayed with the same provider as the process to switch seems complicated, time consuming and costly." HtB Buyer

Reported difficulties re-mortgaging reflected wider concerns regarding access to lenders through shared equity schemes. Some buyers, particularly those buying earlier in the operation of the shared equity schemes, suggested that choice of lenders (and mortgage deals) had been very limited. Others reported difficulty identifying which mortgages were available to buyers using shared equity schemes, and had experienced some frustration at their inability to access the 'best' deals.

Some buyers reported difficulties associated with scheme timescales. This was most commonly HtB or NSSE buyers where development delays had extended the completion date beyond the deadline for the shared equity application - including cases where a new application had to be made. Some suggested that more flexibility was required in the procedures and timescales associated with shared equity schemes, to recognise the realities of the house purchase process (particularly when buying new build property).

"There were several [developer] delays. This impacted us financially as it meant that two provisional mortgage offers expired, leaving us with less competitive rates." NSSE Buyer

A few buyers, particularly those using the NSSE scheme, referred to difficulties with the quality of their home. This was most commonly associated with challenges in resolving 'snagging' repairs.

Some buyers expressed frustration around the specification of the shared equity schemes, and limitations on the price points and market sector(s) available to buyers. This included some HtB buyers frustrated that the scheme was limited to new build properties only, including some who had become aware of the OMSE scheme only after completing their purchase. These participants suggested that buying an existing property may have improved the housing options available to them, and secured better value for money (for the buyer and Scottish Government). Others suggested that the price cap had presented challenges in accessing a home that met their needs. This included HtB buyers who had been limited in the range of new build properties available within the price cap, and OMSE buyers who had been repeatedly outbid for properties by a small amount due to the fixed price cap. A few HtB participants referred to having been required to defer their scheme application due to funding having been exhausted for that financial year.

OMSE buyers also noted limitations on property sizes that buyers can access through shared equity schemes. It was suggested that schemes could be more flexible to allow households to buy a larger property if they have a valid use for an additional bedroom and can afford the additional cost.

Several buyers saw a need for the shared equity schemes to be advertised more widely to ensure potentially eligible buyers are aware of available options. This appeared to reflect the experience of some buyers who had been unaware of the shared equity option during their initial house search - particularly those searching on the open market.

"It’s had a big impact for us. More people would like this opportunity." NSSE Buyer

Satisfaction with homes bought with shared equity

The buyers' survey asked about the extent to which buyers were satisfied with key aspects of the property they bought with shared equity. Views were generally very positive, particularly in terms of suiting buyers' needs (94% satisfied), living space (89% satisfied) and running costs (90% satisfied). Satisfaction levels were consistently high across all three schemes.

Buyers appeared to be less satisfied in relation to build quality. Around three quarters (77%) of all buyers were satisfied with the build quality of their home, views being least positive amongst NSSE buyers (65% satisfied and 22% dissatisfied). NSSE buyers were also less satisfied than others with the quality of the area they live in (67% satisfied and 14% dissatisfied).

There were a few differences in satisfaction levels across other buyer groups. First-time buyers were less satisfied with the quality of the area they live in (89% were satisfied compared with 94% of existing buyers) and their home's build quality (75% were satisfied compared with 81% of existing buyers). Those with a purchase price of less than £100,000 were less satisfied with the quality of the area they live in (86% were satisfied, compared with 92% of those with a sale price of £150,000 or more).

Base: HtB 2067, NSSE 120, OMSE 964

Resale, increasing equity stake and re-mortgaging equity

Buyers were asked a series of questions around experiences of re-selling a home bought through the Scottish Government shared equity schemes, their awareness and potential interest in options to increase their equity stake, and any experience of re-mortgaging their home since buying with shared equity.

Reselling properties bought through shared equity schemes

The vast majority (97%) of respondents were still living in the home bought with shared equity (97% of HtB, 99% of NSSE and 97% of OMSE buyers). However, this is likely to reflect some response bias as the postal survey was sent to the address of the property bought with shared equity only.

Amongst the small number of buyers who had sold the home bought with shared equity, most were still in owner occupation (71%) although 16% had moved into the private rented sector.

Buyers were presented with a range of factors that may have contributed to their decision to move from the property bought with shared equity and asked to choose all that applied (see Figure 33). Moving to a larger property was the most common reason chosen; this was mentioned by just over half (52%) of all those who had moved, and was a particularly common factor for HtB buyers. Other common factors included:

• Getting married or moving in with someone (mentioned by 23% of all those who had moved, and the most common factor for OMSE buyers);
• Moving to a better area (20% of all those moving);
• Moving closer to family or friends (18%, and more common for HtB buyers); and
• Moving to a different property type (17%, and more common for HtB buyers).

Base: HtB 69, OMSE 40. Multiple selections allowed. Insufficient NSSE respondents to present results.

Increasing buyers' equity stake

All three shared equity schemes provide a facility for buyers to repay the Scottish Government to increase their equity share. Buyers can increase their equity share up to 100% ownership, but must do so by at least 5% each time. The buyer survey asked about awareness and use of this facility, and whether buyers had re-mortgaged since first buying their home with shared equity (for example to get a better mortgage deal).

Around one in ten (11%) respondents had increased their equity stake since buying with shared equity. Those who had been in their home for longer appeared more likely to have increased their equity stake; 13% of those buying prior to 2016 had done so, compared with 7% of those buying in 2018/19. Nearly half (46%) of those who had increased their equity stake had increased to 90% or more, including just over a quarter (26%) who had increased their share to 100%.^[18]

In addition to the 11% who had increased their equity stake, 40% understood how it works. There were some differences across shared equity schemes, with OMSE buyers more likely to understand how the option to increase their equity stake works (61% compared with 47% of HtB and 49% of NSSE buyers). There were also differences by year of purchase (57% of those buying in 2018 or 2019 understood how increasing their equity stake works, compared with 47% of those buying prior to 2018).

Base: HtB 2043, NSSE 116, OMSE 948

Around half (52%) of respondents expressed an interest in increasing their equity stake over the next five years, and this was broadly consistent across the three schemes. However, just under three quarters (73%) of those who would like to increase their equity stake felt they were likely to do so (equivalent to 38% of all respondents). A higher proportion of HtB and OMSE buyers were likely to increase their stake (38% of HtB and 41% OMSE buyers, compared with 27% of NSSE respondents).

Base: HtB 2044, NSSE 118, OMSE 947

The survey asked buyers an open question on why they felt they would be unlikely to increase their equity stake. These views were also explored through buyer interviews.

Written responses from survey respondents and qualitative interview findings indicated that those who would be unlikely to increase their equity stake included buyers who did not yet wish to increase their equity stake. For example, some preferred to focus on reducing other (higher interest) debts. Some specifically noted that the "security" offered by the shared equity schemes was in part linked to buyers not being required to repay the Scottish Government's equity stake until they sell their home.

"It’s peace of mind that I won’t have to pay back the equity share until I move" HtB Buyer

However, a number of buyers who wished to increase their equity stake cited a range of reasons that may limit their ability to do so.

Affordability was the most common reason, and was mentioned by more than half of those providing comment. This included respondents prioritising other financial commitments, including a focus on reducing mortgage and/or other debts, and starting a family. Some also raised concerns around current economic uncertainty and/or job insecurity as affecting their ability to save towards increasing their equity stake.

"Not sure if I will have the money to increase my stake in the next 5 years, not completely sure of how much it costs and how I go about it." HtB Buyer

A number of buyers were unclear on how the process of increasing their equity stake worked. This included some who wished to see more information on how they can increase their stake, and others who felt that they were unclear on the potential benefits of doing so. Some buyers also raised concerns around the potential costs associated with what was perceived as a potentially complicated process to increase their equity stake. These buyers suggested that these costs undermined the potential benefits of increasing their stake.

"Like to, now I can afford xtra on the mortgage but unsure of overall pros/cons." HtB Buyer

The other common factor raised by those who felt they would be unlikely to increase their equity stake was the requirement for buyers to repay a minimum of 5% of the property value. Some buyers suggested that this was an unrealistic sum for them to save, particularly in the context of wider financial pressures. There appeared to be some interest in a facility for buyers to increase their equity stake through smaller repayments.

"I would be curious what the increase in costs would be, how much fees would be to get surveyed etc... Is it worth it?" HtB Buyer

Re-mortgaging a property bought through shared equity schemes

Just over a quarter (26%) of all respondents had re-mortgaged since buying their home. HtB respondents were more likely to have re-mortgaged (30% compared with 22% of NSSE and 15% of OMSE buyers). There were differences across other buyer groups with the following being less likely to have re-mortgaged: first-time buyers (23% had re-mortgaged compared with 33% of existing buyers), those where the Scottish Government took an equity share of 30% or more (16% compared with 29% of those with a higher share), those in rural areas (19% compared with 28% of those in urban or small town areas) and single parents (17% compared with 27% of those in other household types). Respondents were also more likely to have re-mortgaged where they had been in their home for more than 2 years; 42% of those buying prior to 2016 had re-mortgaged, compared to just 3% of those buying in 2018 or 2019.

Buyers who had not re-mortgaged since buying their home were asked an open question about their reasons for this. A substantial number were still within their initial deal period and so re-mortgaging would not enable them to access a better deal. However, some expressed concerns regarding scope to re-mortgage once their current deal ended. These buyers would have liked more information following completion of their purchase on subsequent re-mortgaging and resale.

Others providing written comment referred to a range of factors that had affected their ability to re-mortgage since buying their home. A lack of clarity around restrictions or requirements on buyers when re-mortgaging appeared to be an issue for some. This included queries around whether buyers were required to secure Scottish Government permission before re-mortgaging, any associated fees, and whether buyers were able to switch lender (or were limited to securing a better deal with their current lender). Some suggested that the process could be made simpler to enable shared equity buyers to re-mortgage without incurring mortgage broker costs.

"Rules are unclear, unsure if permission is required if only wanting a preferential interest rate." HtB Buyer

Some also felt that using shared equity had limited their access to lenders and products when re-mortgaging. These products were seen as higher cost than those available to 'standard' buyers, and some felt that re-mortgaging was unlikely to improve their financial circumstances.

"Limited to HtB mortgages with additional fees which we were not made aware of at the time." HtB Buyer

Some buyers referred to other requirements or restrictions on their ability to re-mortgage. Some reported that lenders had required them to repay the Scottish Government stake as part of any switching, noting that this had not been an option for them. Some had also been advised by mortgage brokers that switching lender is likely to be a complicated and costly process.

"Considered it but was told that changing mortgage provider would involve buying out the HtB equity." HtB Buyer

Future housing intentions

The survey asked about buyers' future intentions in terms of interest in moving home, their reasons for wishing to move, and the likelihood of their being able to move home in the next five years.

Just over a third (36%) of respondents would like to move home in the next five years. HtB and NSSE buyers were most likely to want to move; 38% and 37% respectively compared with 31% of OMSE respondents. A large majority (84%) of those who wanted to move felt that they were likely to do so in the next five years. A higher proportion of HtB buyers who wanted to move felt they were likely to do so; 86%, compared with 73% of NSSE and 77% of OMSE buyers who wanted to move.

Some buyer groups were more likely to want to move home in the next five years. First-time buyers, those who had bought flats and smaller (1 or 2 bed) properties, those who had been in their home for three or more years, and those without children were most likely to wish to move home:

• 55% of those who bought a smaller (1 or 2 bed) property would like to move, compared with 23% of those in a 4+ bedroom property.
• 55% of those who bought a flat would like to move, compared with 36% of those in a house.
• 45% of first-time buyers would like to move, compared with 27% of others.
• 46% of those who bought their home prior to 2017 would like to move, compared with 31% of those who bought in the last two years.
• 46% of those without children would like to move, compared with 32% of those with children.

Moving to a larger property was the most common reason for those wishing to move home, consistent with the larger proportion of households in smaller and flatted properties who wish to move (see figure 36). Moving to a larger property was a particular priority for HtB buyers, mentioned by 73% of those who wish to move.

A substantial proportion of those wishing to move mentioned moving to a different type of property (30%), to a better quality property (30%) or to a better area (32%). OMSE buyers were more likely than others to be seeking a move to a different type or better quality of property, while OMSE and NSSE buyers were more likely than HtB to wish to move to a better area. Comparison with the reasons given for buyers who have already moved shows some commonality, with moving to a larger property and to a better area amongst the main motivations for both groups.

Base: HtB 783, NSSE 45, OMSE 298

A small proportion of buyers (10%) would like to move but felt unlikely to be able to do so in the next five years. For these respondents, difficulty affording a better or more suitable property was the most common barrier (67%). This was more common for HtB respondents (71% compared with 62% of NSSE and OMSE buyers).^[19] Other common reasons were that they could not afford a suitable property in the area they wanted to live (41% of all respondents) and that they did not feel it was a good time to sell (21% of all respondents).