Published on:
21
March 2013
The launch of a Local Authority Mortgage Scheme in Clackmannanshire moved a stage closer this week when councillors approved a guarantee of £3 million, which could see the emergence of up to 150 first time buyers getting on to the local housing ladder.
The scheme was first launched in England in March 2011, and mortgages were initially offered in Blackpool and Warrington. Since then a further 42 local authorities have joined the scheme with approximately 35 planning to launch soon.
So far no local authority in Scotland has rolled out the new scheme. Clackmannanshire could be among the first, although several legal hurdles have still to be overcome before it is finally approved.
Housing Convener, Councillor Les Sharp, told the Housing, Health and Care Committee today (Thursday): "Raising a deposit is still the biggest barrier for all home buyers. As a result of the recession and the adverse affect on the local economy and the housing market, a number of local authorities, including Clackmannanshire, are taking a pro-active stance and addressing pressing issues in increasing the supply of affordable housing."
The turmoil in the financial and banking market has had a severe impact on both the local economy and on local housing.
Councillor Sharp went on: "One in four prospective first-time buyers believe it will take them at least 10 years to have a deposit in place and one in five believe they will still be renting or living with family in 2022.
"This means the applicant requires a substantial deposit, for example a first time buyer purchasing a property valued at £100,000 would have to provide a deposit in the region of £20,000. Many potential first time homebuyers do not have the funds needed for the deposit.
"To address the shortage in supply of affordable housing to those who need it, and to help the housing market and the local economy in general Clackmannanshire Council has considered how it can assist potential homebuyers."
This will be done by entering into a partnership with a residential mortgage provider.
The scheme is aimed at first time buyers, providing help for potential buyers who can afford mortgage payments - but not the initial deposit - to get on to the property ladder.
If a potential buyer meets the strict credit criteria applied by the lender, and meets the criteria set out by Clackmannanshire Council to qualify for a mortgage under the scheme, the potential buyer will obtain a 95% mortgage on similar terms as a 75% mortgage, but without the need to provide the substantial deposit usually required.
It is expected that the £3m guaranteed to the lender from the Council could see up to 150 new mortgages agreed and a massive boost to potential first time home owners in Clackmannanshire.
The Local Authority Mortgage Scheme (LAMS) is designed to help increase the supply of affordable housing for those who need it and at the same time give a huge injection to the local housing market and the local economy.
The Council will not have any direct dealings in any application for mortgages under the scheme. When the LAMS is formally launched, further guidance and fact sheets will be available for interested applicants, but the approved mortgage lender will manage and operate the scheme.