Liverpool City Council’s Cabinet will be asked to approve plans for a new Local Authority Mortgage Scheme today. If it is given the go-ahead, it could help more than 200 people into their first homes.
The £3 million scheme will see the Liverpool City Council working alongside mortgage lenders to boost the amount made available to house buyers.
In the current financial climate, most lenders are prepared to lend a maximum of 75 to 80 per cent of the value of the property, even if the applicant can afford a 95 per cent mortgage. This means applicants require a substantial initial deposit, which is out of the reach of many first-time buyers. However The £3 million scheme will see the city council working with mortgage lenders to boost the amount made available to house buyers. The Council will tackle the problem by underwriting ‘top-ups’ of up to 20 per cent on the loans so that buyers can obtain a 95 per cent mortgage on similar terms to a 75 per cent mortgage, but without the need to provide the large deposit usually required.
So for example for £100,000 property, buyers would only have to pay a deposit of £5,000, rather than £25,000.
The £3 million pot of cash from Liverpool City Council will be placed in a high interest account which can be used to cover any defaults in payments. The indemnity would only be called upon if a loss is made by the mortgage lender. Any interest made by the council would be ploughed back into the scheme to help fund further mortgages.
Liverpool City Council Leader, Councillor Joe Anderson, said: "It’s vital, if we are to boost housing in Liverpool and encourage people to live here, that home ownership is not restricted to people with higher incomes. We want to do all we can to help people overcome the difficult economic times and get onto the property ladder.
"We are determined to stimulate the housing market here and to do all we can to support those who wish to buy a home. This scheme is an important part of our plans for achieving that."
The scheme forms part of the city council’s Housing Delivery Plan for 2012 to 2015, which will see a £130 million investment in housing over the next three years, the delivery of an extra 2,000 new homes across the city and a drive to bring empty properties back into use.
The scheme is specifically targeting older houses in the city and will not be available for new-build properties. The maximum loan value will be £125,000, with the maximum indemnity provided by the council being £27,000. The scheme will also not be available for buy-to-let or right-to-buy purchases.
Potential buyers will have to meet the strict criteria set out by the mortgage lender in order to qualify for the Local Authority Mortgage Scheme.
The Liverpool City Council indemnity will be in place for a fixed five-year period for each mortgage granted under the scheme and will only be available for first-time buyers.
The city council’s Cabinet Member for Housing and Community Safety, Councillor Ann O’Byrne, said: "This is a fantastic scheme, which will provide a real boost to first-time buyers who are finding it increasingly difficult to become home owners.
"This approach will minimise the cost to the council while taking advantage of the expertise of existing mortgage lenders. It is an imaginative solution to overcoming the problems faced by many first time buyers, and will assist many people to realise their dream of becoming home owners."