First-time buyers will find it easier to get on the property ladder under new council mortgage scheme

Multi-million pound scheme could help ailing housing market

Kent County Council is just months away from launching a multi-million pound mortgage scheme which could help hundreds of first-time buyers get their foot on the property ladder.

In what will be the biggest of its kind in the country, KCC and district councils will team up and work with lenders to offer a unique mortgage service, which will breathe life into the ailing housing market and give the local economy a boost.

The scheme, hoped to be launched in April, could be worth up to £24m if every district authority gets involved, helping at least 700 first-time buyers. Talks are already underway with Lloyds TSB to get the programme off the ground.

Cllr Kevin Lynes, KCC cabinet member for regeneration and economic development, explained that a district council would put forward £1m – the maximum allowed in such a scheme – and KCC would match-fund that figure.

This money would then be used to help first-time buyers – who are currently faced with huge deposits and high interest rates – secure a mortgage.

“In the last few years we’ve seen more first-time buyers in their 40s as banks stopped lending or asked for big deposits which younger people just couldn’t afford,” said Cllr Lynes.

“What we can do is de-risk lending. Buyers will go through the same application as they would normally with a lender.

“But as a first-time buyer in an area where a district council is involved they will only have to find a five per cent deposit.

“KCC and the district council act as a surety for 20 per cent of the mortgage. The buyer then gets a 95 per cent mortgage, but with repayment rates of 75 per cent.

“The money KCC and the district council put forward is held by the lender for five years. It will grow in interest as the rates will be higher.

“In the unlikely event of any default, the money would come from there so there is no risk to taxpayers’ money.”

Cllr Lynes said under the scheme with Lloyds TSB – which is yet to be officially confirmed – first-time buyers would not be able to purchase brand new houses.

But he said KCC was in ongoing talks with other lenders, which could have different policies.

Under the council mortgage scheme, local authorities can only set aside £1m, but KCC “tweaked” the rules by setting up a partnership with districts and boroughs so there would be £2m for areas involved.

“KCC has set aside £12m in match-funding,” said Cllr Lynes.

“Three or four councils have said they want to be involved and others are interested but need to work out where to find the money from.

“We’re not expecting all the 12 councils to be involved at once. If KCC gets a yes from every district council it would mean up to £24m available.”

KCC said the minimum number of first-time buyers it could help was 700.

Cllr Lynes said this could start the ball rolling.

“Every first-time buyer will unlock five more house transactions down the line and so we’re looking at 3,500 and this then goes on to unlock even more,” he said.

“This will help the housing market, which then helps with employment.”

Lloyds TSB would not be drawn into commenting on the Kent-wide scheme until it was confirmed, but a spokeswoman said the local authority initiative was for loans between £25,000 and £350,000, although the maximum loan size would be dependent on the particular council.

“The first-time buyer will own the property in its entirety - unlike shared ownership schemes,” said the spokeswoman.

“The fixed rate mortgage products that will be available for first-time buyers during this scheme will be at a lower rate of interest than would normally be available for this level of deposit, helping them with the cost of their monthly payments.”