London’s councils are considering offering mortgages to hard-pressed buyers.
The move could see the return of local authority mortgages after an absence of more than 20 years and give Londoners an alternative to high-street lenders, helping to kick-start the housing market in the capital.
‘The problem isn’t the lack of properties, it’s the lack of mortgages’
The idea is backed by influential think-tank the New Local Government Network (NLGN). “The sooner you inject some money into the market the sooner it will revive,” says spokesman James Hulme. “We are in a situation where there are not many mortgage providers in the market, especially if you have a deposit of less than 10 per cent.”
In the Seventies, local authority mortgages were commonplace, with almost 600,000 people buying properties with help from their council. But by the early Eighties councils were struggling to compete with more streamlined commercial lenders.
Funding for the new schemes would come from Treasury loans. The Government recently cut the cost of lending to councils from 5.7 per cent to 3.93 per cent, giving town halls encouragement to offer mortgage deals at a competitive rate.
Mr Hulme said councils need to step forward and take the risk. “Like any property investment, you could end up losing money but there is a wider issue in that there is a considerable number of people who would have got a mortgage easily two years ago but who don’t have a hope now.
Camden council’s housing chief, Councillor Chris Naylor, discussed the idea when he met junior housing minister Iain Wright MP. Lambeth’s leader, Councillor Steve Reed, is also keen to set up a scheme. “We all know the problem with the housing market isn’t the lack of properties for sale, it’s the lack of mortgages,” he said. “With more mortgages you get more buyers.”