Councils to help first-time buyers on to housing ladder

 
Flats for sale Another 10 councils are waiting to join the scheme.

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.

Sustainable market

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.

Start Quote

It is not the job of the local authority to spend council tax money propping up an over-heated housing market”

End Quote Henry Pryor Estate agent

"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.

Complaints

The project was launched as the number of complaints against estate agents was described as "unacceptably" high by the Property Ombudsman, despite inactivity in the housing market.

Start Quote

The regulation of letting agents is well overdue”

End Quote Ian Potter Association of Residential Letting Agents

Christopher Hamer said he had dealt with 1,338 new cases last year. This was a record number during the scheme's 20-year existence.

Among the cases, which reach the ombudsman if a customer and agent are unable to come to agreement following a complaint, were 646 cases about sales and 672 cases about lettings.

Mr Hamer repeated his view that the government should step in to introduce better protection for tenants and landlords against rogue letting agents.

Unlike estate agents, letting agents do not have to belong to an ombudsman scheme, although many sign up voluntarily.

His views were backed by the Association of Residential Letting Agents (Arla).

"The increase in the number of complaints recorded by the Property Ombudsman is unsurprising, given that the ombudsman covered more tenancies during 2010," said operations manager Ian Potter.

"However, as the ombudsman says, the regulation of letting agents is well overdue. The absence of regulation means the consumer is left vulnerable, with nowhere to go when there is service failure or fraud."

 

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  • rate this
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    Comment number 125.

    Councils, although facing cuts, will still/have always had cash reserves. These reserves are invested to get the best rate of return, which at the moment is... close to nil.

    These council provided 'deposits' will attract interest at the same rate as the lender loan, the council will be BETTER off as long as the selection process is robust.

  • rate this
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    Comment number 118.

    I think this is an excellent idea. In 1974, when interest rates were high and mortgages were rationed by the Building Socs, the old GLC ran a scheme to help first-time buyers who lived or worked in London. We benefitted from this and were very grateful for it at a time when no-one else would give us a mortgage. It is always better to buy your own home rather than pay rent into a landlord's pocket.

  • rate this
    0

    Comment number 83.

    And I thought local councils were suffering cuts. Why not lower the council tax to the benefit of all instead of using it to subsidise housing at bubble prices with the risk of loss if prices fall?

  • rate this
    0

    Comment number 81.

    If this is such a good idea and implies little risk then i dont see why the banks who are all apparently back in profit dont offer smaller deposit mortgages.

    I think the council tax payers in these areas have a right to demand better from their councillors.

  • rate this
    0

    Comment number 74.

    It's worrying how many people still believe that they *have* to own property - simply because we've had a bull market in the past few years. Only due to unprecedented risk-taking and regulation, have house prices been allowed to creep up to 6x earnings. Consider how much less of a deposit you would need if prices were simply allowed to fall back to the historic 3.5x income average.

 

Comments 5 of 13

 

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