4. Awareness of the Fund and Ease of Understanding
This chapter considers how interviewees became aware of the First Home Fund, lenders' and developers' decisions to be involved with the First Home Fund and how easy the range of stakeholders found the First Home Fund to understand.
Set up of the First Home Fund
Professional stakeholders (lenders, developers and IFAs) generally reported that Scottish Government communication about the First Home Fund had been good and that information about the planned approach had been shared well in advance.
Lenders were particularly likely to say that the Scottish Government was very good at initiating early discussions and keeping them well informed about future plans in this area. This timely approach was welcomed and had helped to ensure the decision to offer a First Home Fund compatible mortgage product was a relatively easy and straightforward one (discussed further below).
"That team have always been very good at letting us know what's coming up and having those early conversations...that feeds into us being able to have those discussions in plenty of time and certainly makes it all a lot simpler at our end." (Lender)
IFAs also typically reported that they had become aware of the plans to establish the First Home Fund in good time, including because this type of information tends to be shared through a range of trade publications.
The experience of developers was more mixed. There was a perception that the launch of the First Home Fund was not as well organised as had been the case for other Scottish Government shared equity schemes. For example, one developer reflected that whereas branding and marketing materials had been supplied for Help to Buy, they had to develop their own First Home Fund related materials. An associated concern was that, with each developer producing their own publicity materials, building the brand and raising awareness about the First Home Fund among potential home purchasers may have been diluted and less effective.
Buyers' awareness of the First Home Fund
There was a lot of variation in how Buyers had become aware of the First Home Fund. As noted earlier, a small number had carried out extensive, primarily web-based research, in preparation for buying a home. Others indicated that they had carried out more preliminary web-based research. In both cases, Buyers generally referred to having visited the Scottish Government and/or the Link websites.
Some mentioned seeing promotional materials or advertisements produced by developers, usually on developer websites. Some had become aware of the First Home Fund through family, friends or colleagues that had previously accessed one of shared equity schemes, or through social media or money advice websites.
Others had first heard about the First Home Fund (and the concept of shared equity in general) through early conversations with a mortgage advisor, lender or developer. Similarly, IFAs reported that most potential buyers were not aware of the First Home Fund at the point of first making contact and that a key part of their role was to set out the full range of options available to a potential home purchaser.
All but one of the Buyer interviewees who had spoken with an IFA reported that the First Home Fund had been explained to them as a possible option from the outset. The remaining Buyer said that their IFA had only told them about the Fund when other financing options had fallen through and accessing the First Home Fund made the difference between being able to proceed with a purchase or not. The impact of COVID-19 on mortgage offers is covered in Chapter 6.
Buyers who had accessed information about the First Home Fund from either the Scottish Government or Link websites all thought that the information provided was of a good quality, with some describing it as 'clear and comprehensive'. Similarly, explanations or information provided by a mortgage advisor was generally described as clear and easy to understand.
Some did report going back to a mortgage advisor on points of clarification or for further explanation of certain aspects of the First Home Fund. There were no common issues about which potential buyers sought more information. However, a small number of Buyers said that they had sought reassurance that they had not overlooked something important or had 'missed the catch' in what seemed to be such a positive option.
In terms of potential improvements in information provision, some Buyers suggested information about the management fee, and in particular when it is due to be paid, could be given greater prominence. One IFA also suggested that summary information about the application process, and in particular key timescales, could perhaps be more accessible.
A more general observation, which was raised by all types of stakeholder, was that the First Home Fund had not been well publicised and that prospective buyers are only likely to have known about it if they had actively sought out information on funding a first home purchase.
"I did think that I only knew about it because I had gone to ask about getting a mortgage anyhow...and maybe other younger people might be missing out...if they think they haven't got enough saved maybe...that seems a pity." (Buyer)
However, there was also a note of caution that, while in theory it would be positive if more people were aware of the First Home Fund, there is a potential to create a level of demand and expectation amongst first-time buyers that cannot be met.
"On the one hand it would be good if more people knew about it... but then unless there's more money - or somehow, it's made to last longer - we could just end up with a lot of disappointed people... it's not good for anyone if the money runs out in a few months." (IFA)
Ease of understanding
A consistent finding across this study has been that the First Home Fund's approach to supporting first-time buyers is generally considered to be a straightforward and easy to understand one.
IFAs and lenders described the First Home Fund as being relatively easy to explain to potential buyers, in large part because in comparison with other shared equity options, there were relatively limited eligibility criteria that needed to be set out, explained and assessed.
"Within minutes you are pretty sure whether someone will be eligible or not... that's really only whether they are a first-time buyer and have a bit of a deposit. Obviously, you still have to go through all the details with them to make sure it's the right way to go... but basically you can tell them that if you can find them a mortgage then they can get it." (IFA)
Buyers generally had a similar perspective. Overall, the First Home Fund was described as straightforward to understand. However, some Buyers felt that buying a home had been a complicated process and that they had been required to spend a significant time looking into all aspects of their purchase, including the criteria and arrangements for the First Home Fund. A few Buyers also thought that, on reflection, they should perhaps have sought more information or sought information at an earlier stage in the process. This was generally explained as reflecting their own prior lack of experience with the process or disruption in their lives caused by COVID-19, rather than as being about the First Home Fund itself.
Simplicity was also seen as a key advantage for lenders, who felt it made it easier to ensure borrowers had a clear understanding of their mortgage-related obligations going forward. The absence of interest charges was felt to eliminate one of the most frequent areas of potential confusion with some other shared equity products on offer in the UK. It was also seen to reduce the risk for lenders if buyers had given insufficient thought to affordability beyond the short term.
IFAs reported that it can sometimes be difficult to get potential buyers to think through the medium to longer term implications of receiving support from a shared equity scheme such as the First Home Fund, including in relation to resale. Likewise, some Buyers acknowledged that they may have been less clear about the post-purchase conditions and arrangements associated with the First Home Fund.
"It’s simple to get your head round."
"Just does what it says on the tin."
"I looked at other shared equity [schemes] but they were confusing. This is easier to understand."
"Was pretty sure we’d get it after a couple of minutes."
"Really simple – really straightforward."
Matt and Ellie’s story
Matt and Ellie are in their late 20s and live in Edinburgh. He took up his first teaching post in autumn 2018. She works for an insurance broker in the City. Their joint income is around £52,000 per year. They are currently renting a one bedroom flat, which costs them around £650 a month plus bills. With Matt having returned to full-time education to become a teacher, and with other student-related debts to pay off, money has been tight for the last few years. Despite this, Matt and Ellie have been saving for a deposit on their own home, and Ellie received a legacy from her late grandmother, meaning they had around £20,000 for a deposit. They both work long hours and were keen to buy in or near Edinburgh if at all possible. They are looking for a 2 or 3 bedroom property that they can ‘grow into’ over the next few years, and potentially start a family.
They started looking seriously when Matt took up his teaching post and found out about the Scottish Government’s shared equity schemes through an early conversation with a mortgage advisor. However, with property price caps associated with the Help to Buy, and not being able to offer over market value and access the LIFT schemes, they have really been struggling. Their mortgage advisor let them know about the First Home Fund in its early days and it immediately unlocked a number of possible options. They completed on their 5-year old, 3 bedroom home in Gilmerton in March 2020 and moved in just before the lockdown began.
They paid around £285,000 for their home, with a £25,000 contribution from the First Home Fund. Their monthly mortgage repayment is around £1,050 but even with increased travel costs they are confident that this will be affordable going forward. In a few years they might think about starting to repay some of the equity share, but in the meantime are saving to furnish their new home.
An IFA said...
"For first-time buyers Edinburgh can be brutal...they can bid on dozens of properties but keep missing out. Unless they’ve got a big chunk of savings, the £25,000 is the difference between them buying or not."
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