FIRST-TIME buyers could get a leg-up on to the housing ladder thanks to a council scheme to reduce the deposit on a mortgage.
South Kesteven District Council has set aside £1m for its local authority mortgage scheme, which will guarantee three quarters of a first-time buyer’s mortgage deposit on properties worth up to £125,000.
This means buyers will only have to pay five per cent of the value of the mortgage, rather than the usual 20 per cent deposit.
The scheme will initially run as a pilot for a year and could help up to 60 buyers living in the district. If it is successful it could be extended.
Council leader Coun Linda Neal (Con) said: “It’s the sort of innovation we are keen to adopt. It could make dreams come true for people and boost our aim of supporting development of neighbourhoods and communities.
“A lot of people can afford mortgage repayments, but can’t raise the deposit. It’s designed to help people buy their first home and will stimulate the whole property market.
“National statistics show that when a first time buyer enters the market, it prompts another five movements further up the chain.
“There could be people in council accommodation, for instance, who would like to move into the private sector. If we can help them buy their own home it would release pressure on our housing register.”
The local authority mortgage scheme is being run in partnership with Lloyds Bank.
First-time buyers who take out a £100,000 mortgage through the scheme will only pay a £5,000 deposit on a £100,000 house purchase, instead of the usual £20,000. The council will guarantee the remaining £15,000 with Lloyds.
Buyers will approach Lloyds directly and the bank will then contact the council for the deposit guarantee. The council will not know the identity of the buyers and will have no role in approving individual mortgages.
The council would only have to pay any money to Lloyds if the buyer defaults on their mortgage, the house is repossessed by the bank and is sold for less than the value of the mortgage.
The scheme only applies to existing properties as a similar Government guarantee has been announced for new builds.