A £1MILLION fund could be set up by Conwy County Borough Council to help first time buyers get on the housing market.
In the first move of its kind by a council in Wales, the authority would plug the gap between the mortgage offer and deposit needed to secure a loan.
If approved the council would not give money to lenders but would provide indemnities to help cover the cost between the loan and deposit.
If a buyer with a deposit of £5,000 wanted to buy a house valued at £100,000, but the lender’s policies would only permit a loan of 75 per cent the council would provide an indemnity to the lender for up to £20,000, thus allowing the lender to lend the potential buyer a total of £95,000.
It is hoped that the fund, also known as the Local Authority Mortgage Scheme, would help first time buyers on to the property ladder in the area. The lack of such buyers has continued to depress the housing market during the recession, which in turn has had an adverse effect on the local economy.
The recent turmoil in the banking and financial sectors has seen a reduction of LTV mortgages from 95 per cent down to 75 per cent, meaning buyers now could have to place a 25% deposit. The scheme would see the council provide assistance to the buyer through an indemnity, which would make up the shortfall.
One of the recommendations of the report put forward to cabinet yesterday (Tuesday) is that the maximum value of property to qualify for the scheme shall be £140,000, index linked as appropriate.
The scheme, which already operates in councils in Scotland and England, is also being considered by other Welsh authorities.