Ministers consider revival of local authority mortgages
Author: The Guardian |
The government is paving the way for local authorities to offer low-cost mortgages to first-time buyers and others struggling to obtain loans from traditional lenders who are demanding huge deposits.
The housing minister, Margaret Beckett, is understood to be considering resurrecting schemes last seen in the mid-1970s, when local authorities played a major role in the mortgage market. Officials are exploring schemes that will help buyers shut out of the market by banks and building societies that no longer offer loans above 90% of the value of a home.
One option under consideration is to allow councils to borrow on capital markets, using their triple-A credit rating to raise finance more cheaply than banks can. Councils are currently prohibited from lending below the “standard national rate” of 5.07%, but restrictions may be lifted, enabling them to lend at rates they have negotiated in the money markets.
Local authorities became significant lenders in the 1960s, and during the 1973-1974 “mortgage famine” they played an important role in filling the gap left by building societies in an earlier credit crunch. They typically offered loans of up to 97% of the value of a home, with repayments spread over 25 or 30 years. Mortgages were granted to local people only and targeted areas councils were keen to see regenerated.