London Money director, Martin Stewart dubbed the scheme an interesting one but said its existence “possibly suggests that the new build market is going to see transactions coming under pressure due to the removal of Help to Buy and the underlying market conditions".
Stewart noted that issues may arise when you allow people to "try before they buy" and said the “devil will be in the detail”.
“I normally revert to my standard position, if you can’t buy a house through normal channels, wait until you can,” Stewart added.
Others were more positive. Brian Byrnes, head of personal finance at the savings, investing and mortgage brokerage app Moneybox said innovations like this are welcome in the market.
“Saving for a mortgage while renting can be extremely challenging especially as rents are rising rapidly in London and surrounding areas,” Byrnes said.
“Like all innovations, the proof will be in the pudding. Will borrowers be able to access competitive mortgage interest rates and what happens if the circumstances of a potential buyer changes while they are saving for their deposit? These details will be important but for now I think aspiring homeowners will welcome this market innovation."
Fairview explained that the buyer can exit the agreement before the mortgage approval stage and receive their initial 1 per cent deposit back.
In this case, the fixed monthly payments would be kept by Fairview as compensation for the buyer’s occupation of the property.
The developer also highlighted that the price of the property is agreed at the start of the agreement and will be fixed for the duration so will not fluctuate with market volatility.
“We have to remember that the market is cyclical in nature, and it's always changing,” Hood said.
“A lot of the time, predictions from last year or the year before were incorrect, you never actually know what the market is going to do until you're in it.
"What we're trying to do with this scheme is deliver some certainty over a shorter period of time so people are less exposed to the elements they will face if renting a property over a five year period.”
jane.matthews@ft.com
