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Council to underwrite deposits for first time buyers with £2m fund

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Council to underwrite deposits for first time buyers with £2m fund

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Published by 24publishing for 24dash.com in Housing and also in Local Government

Council to underwrite deposits for first time buyers with £2m fund Council to underwrite deposits for first time buyers with £2m fund

Leeds City Council is joining a scheme to help first-time buyers secure mortgages.

It is set to join the Local Authority Mortgage Scheme which will see the council underwrite up to four-fifths of the 25 per cent deposit needed to help buyers secure their first homes.

The scheme would be open to anyone in the city looking to buy their first property valued at a maximum of approximately £160,000, with the council support aimed at those who would be able to afford monthly mortgage repayments but who are unable to put down the full initial deposit required, which is currently set at around 25 per cent by most lenders.

Under the scheme, the council would offer to underwrite up to four-fifths of the 25 per cent deposit needed with the buyer supplying the other one-fifth and then being able to benefit from similar repayment terms to a 75 per cent mortgage.

Leader of Leeds City Council Councillor Keith Wakefield said: “Everyone is aware that the housing market in the current financial climate is really struggling and a key reason for that is how difficult it now is for first-time buyers to get on the first rung of the property ladder.

“One of the major obstacles for first-time buyers is the need to find a deposit of up to 25 per cent which is proving increasingly prohibitive, so this is where we can help by offering them the chance to reduce the lump-sum they need put down to a much more manageable level which will make the whole process more attractive.”

The council has set aside a total of £2 million for the scheme for an initial five-year period, with a lender to be selected shortly who will offer a competitive rate of interest on the sums deposited.

The idea behind the scheme, which was piloted by 11 other local authorities last year, is to provide a boost to the housing market which in the current financial climate sees the average age of a first-time buyer in Leeds standing at around 37-years-old and properties remaining unsold on the market for increasing lengths of time.

Councillor Wakefield added: “This scheme has already proven successful in other areas, and the associated benefits it brings to the local economy through allowing other people to move and increasing work to businesses within the housing industry would provide a big boost to the local Leeds economy through secondary and additional spending.

”It is a really good example of civic enterprise in action as a new idea which through working closer with business can help make a big difference to people’s lives as well as benefiting the city’s economy as whole.”

Anyone wishing to make use of the scheme must meet strict criteria set down by the mortgage lender to protect all parties from the problem of ‘sub-prime’ mortgage lending.

Councillor Wakefield added: “In no way should this be seen as the council gambling money away like in the sub-prime culture lending to people who were unsuitable in terms of the mortgage repayments they could realistically afford to make. We want to make it clear that everyone who applies will have to prove they have the financial means to meet the repayments before any agreement is signed.

“The key point of the scheme is to help those who are ready to get on the property ladder but are unable to find the deposit necessary to do so, and we look forward to helping lots of people make their dream of owning their first home come true.”

The scheme is to be discussed by senior councillors at the next executive board meeting on Wednesday 7 March, with a lending partner then to be announced and the first deals expected to be offered to potential buyers later this year.

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