First time buyers in King’s Lynn get �1m mortgage lifeline
West Norfolk council is set to invest �1m in a scheme to help first time buyers get a mortgage.
The authority is joining a national scheme in which councils underwrite up to 20pc of the loan.
It enables people to buy a property without needing a large deposit and secure a more affordable mortgage.
In a report to the council's cabinet, deputy leader Brian Long says: 'The scheme will support new housing supply and local economic growth. The scheme offers an opportunity to add stimulus to the local housing market by targeting help for first time buyers.'
Loans are available from some lenders against a 5pc deposit. But much better rates - and lower repayments - are offered to those with more money to put down.
Last night, Mr Long said: 'If you've got a 5pc deposit, the council will indemnify you as if you've got a 25pc deposit.
'You'll get a much better rate because you've got a bigger deposit, which makes the mortgage more affordable, because you get a better mortgage deal if you've got a 25pc deposit than if you've got five.
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'This scheme allows people to buy their homes for a lower rate because the risk's not there.'
Mr Long said if approved by the council's cabinet the LAMS (Local Authority Mortgage Scheme) would be offered to people buying properties it would be building on the Nar Ouse Regeneration Area, in King's Lynn. Work is set to start on a further 40 homes on the site.
'Applying the scheme here would create exceptionally advantageous terms for would-be purchasers and help mitigate some of the risks of the new development,' the report says.
Development has stalled across the region as the market for first time buyers and starter homes has been halted by the recession.
Lenders now apply far tighter criteria for agreeing loans, which mean those looking to take the first step on to the property ladder find it the hardest to get them.
This also makes it harder for councils and those trying to plug the shortfall in affordable housing.
The money is invested in the scheme for five years, earning interest of �40,000 a year.
Mr Long's report says the scheme will help up to 50 buyers. It adds if one or more of them defaults, the council would pay the 20pc it agreed to indemnify to the lender.
West Norfolk will be the second council in Norfolk to take part in the LAMS. In December, Broadland council's cabinet voted to invest �1m.