First-time buyers who used the Government’s shared ownership scheme to get on to the property ladder have been hit with higher interest rates, punitive charges and exposure to the ongoing cladding scandal. 

Young buyers have become increasingly reliant on such schemes in recent years, with high house prices leaving many unable to buy without support. 

More than 320,000 people have used shared ownership, most drawn by the appeal of needing a very small deposit. 

Currently, buyers purchase between 10pc and 75pc of a property using a mortgage, and pay monthly rent on the remainder, which is owned by a housing association or other third party.

Shared ownership was designed to help buyers achieve their dream of home ownership much sooner. But behind its enticing image, buyers have been plagued by hidden pitfalls. 

What is a shared ownership property?

Buying a shared ownership property is a way of vastly reducing the cost of taking that first step onto the property ladder. If you don’t earn enough to qualify for a mortgage on the full price of a home, this scheme offers first time buyers a way to buy just part of a property − between 10pc and 75pc − then pay rent on the rest.

You only need to put down a deposit on the share that you are buying, which means that if you purchase 25pc of a home worth £230,000, you would have to find just 5pc of £57,500 (a quarter of the total value) for the deposit i.e. £2,875. You then take out a mortgage for the remainder of the 25pc and pay rent on 75pc of the house. 

Buyers have the option later to purchase the remaining portion of their home in stages, gradually reducing their rent as they do. This is called “staircasing”.

To be eligible for the scheme you must not already own a home, and must earn less than £80,000 a year as a household.  

The cons of buying a shared ownership home

Unsellable homes

Some of the people who have been hardest hit by the cladding scandal are leaseholders in shared ownership schemes. Because of the way their leases are set out, they now face paying 100pc of remediation works despite only owning a fraction of their properties. 

These costs could exceed the total amount that owners have in their homes, leaving them in negative equity.

Many leaseholders have paid hundreds of pounds in additional fees to their housing association to market their properties, only to discover they are unsellable. 

Despite its pitfalls, the growth in shared ownership has been dramatic. Last year estate agent Savills predicted a 150pc rise in the use of shared ownership once the Help to Buy scheme ends in 2023. Since then first-time buyers’ reliance on the scheme has found itself compounded by a market stifled by lender caution amid the coronavirus crisis.