Councils to help first-time buyers on to housing ladder
Extracted from BBC online news
Councils are to help first-time buyers get on the housing ladder by topping up their deposits.Five councils are pioneering a scheme aimed at buyers who can afford the monthly mortgage repayments but do not have a lump sum saved up.
Many first-time buyers find it difficult to purchase a home because lenders are asking for hefty deposits.
The councils will put 20% of the price in a Lloyds TSB account, with the lender asking for a 5% deposit.
The funds will not go to the buyer and the mortgage rate will be lower.
The councils risk losing money if a buyer defaults, but they get a generous interest rate themselves.
The scheme could benefit up to 300 first-time buyers in each area, but if other councils join, thousands could potentially benefit.
Another 10 councils are waiting to join the scheme.
The scheme is called Local Lend a Hand.
"We know that a lot of young people turn to the Bank of Mum and Dad to get their foot on the ladder, but that is not a solution for everyone," said Stephen Noakes, of Lloyds TSB.
"By developing Local Lend a Hand and working with local authorities across the UK, we're broadening the prospect of home ownership to even more first-time buyers."Helping people to buy their first home is crucial in achieving and maintaining a sustainable housing market," he added.
The councils involved so far are Warrington, Northumberland, East Lothian, Blackpool and Newcastle-under-Lyme.
The scheme was welcomed by Housing Minister Grant Shapps, who encouraged the industry to offer greater help for first-time buyers at a recent summit.
"I am delighted to see that those on the front line of building homes and providing mortgages are stepping up their efforts to help aspiring first-time buyers get a foot on the ladder," he said.
But estate agent and property market commentator Henry Pryor said that councils should not be risking money during a time when their budgets were being squeezed.
"It is not the job of the local authority to spend council tax money propping up an over-heated housing market. If prices have to fall back so that first-time buyers can afford to buy then that is what is what should happen," he said.
Figures from the Financial Services Authority (FSA), published earlier this week, showed that only just over 2% of new mortgage lending in the final three months of 2010 was to those who could offer a deposit of less than 10% of a home's value.
David Clark and Company comment: Our local authority have just spent £500,000 on planning and design for an out of town sports venue that may never be built in the foreseeable future. If councils budgets are squeezed then we think £500,000 spent on helping local first time buyers is a better bet for the continuing economic growth of the area than providing income to architects, consultants and planning fees. If Henry Pryor (see quote above) were to see a housing market fall by the 20% needed then the days of his being in a position to make a comment as an 'estate agent and property market commentator' would be well and truly over!