HUNDREDS of first time buyers in Blackpool will get a helping hand on to the housing ladder thanks to a new pilot scheme.
Blackpool Council expects to help more than 300 residents by pledging £5m to fund up to 20 per cent of their mortgages.
The initiative will see five local authorities topping up the deposits of working people, to bridge the gap between the cost of a typical 75 per cent and 95 per cent loan to value mortgage offered by banks and other lenders.
The new deal means first time buyers who can afford mortgage repayments but not a large deposit will have a chance in the housing market.
Coun Peter Callow, leader of Blackpool Council, said: “Increasing the supply of affordable housing for residents is a key priority.
“We are proud to be one of the first local authorities to invest in the LA Mortgage Scheme which is launched nationally today.
“The lending criteria currently in place has restricted first time buyers and brought this end of the market to a complete standstill which has had an impact on the whole housing market.”
Under the scheme, local councils would step in and provide a security worth up to 20 per cent of the property’s value, which would be held with the lender and on which interest would be paid, enabling the buyer to qualify for a lower mortgage rate.
Lenders still hand over 95 per cent of the purchase price but won’t risk losing the lot if things go wrong.
This is because it keeps hold of the council’s money as a guarantee.
And councils win by earning interest on their advance and free up social housing as tenants buy their own place.
It is hoped the scheme will boost the housing market, which could in turn strengthen the economy.
Kevin Allitt, managing director of Oystons Estate Agents, said: “I think it’s a step in the right direction. It’s good news for Blackpool, it’s a help. But more needs to be done.
“I think the Government needs to be doing more and lenders ought to have a bit more confidence in lending to first time buyers. ”
Other councils taking part in the pilot are Warrington Council, Northumberland County Council, Newcastle under Lyme Council and East Lothian Council.
Lloyds TSB is the first high street bank to join what should eventually be a panel of lenders to offer mortgages under the scheme, which is the brainchild of Sector Treasury Services, part of the Capita Group.
Cecilie Booth, director at Sector Treasury Services, said: “Local authorities could free up affordable or social housing for those who can’t afford to make mortgage repayments and reduce payouts to private landlords and expensive short-term accommodation.”
Stephen Noakes, commercial director for mortgages at Lloyds TSB, said: “We know a lot of young people turn to the bank of mum and dad to get their foot on the ladder, but that’s not a solution for everyone.
“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.”