Council tax cash to 'guarantee mortgages' in bid to bolster Nottingham's housing market

A new mortgage could be guaranteed by public money as part of a local authority's plan revealed today to encourage lending.

Nottingham City Council is in talks with a building society about the possibility of under-writing mortgages with taxpayers' money in an effort to rejuvenate its local housing market.

As part of the plan, the authority could also help home-buyers by stumping up equity where lenders are looking for significant deposits.

The Nottingham is the only lender that has so far publicly expressed an interest in taking part in the scheme.

Councillor Alan Clark, in charge of regeneration at the local authority, said he believed it was one of the first such initiatives proposed.

He said: "Lending now has got so tight that it makes a lot of problems for a city, especially if you want to attract employees to the city to work for the university, for the hospital and for the local authority.

"In a three-way arrangement, with the city council backing it, you can free up the market and unlock things."

He added: "What we did is that six weeks ago we had round table discussions with the housing associations and a couple of lenders to look at what we could do to get things going.

"What we are obviously interested in doing is potentially under-writing mortgages."

The councillor added that if a borrower defaulted on a council-backed mortgage, the authority would take control of the property.

David Marlow, retail director at The Nottingham, told the Nottingham Evening Post: "The society recognises the difficulties in the housing market at the moment."