Council homes scheme to aid first-time buyers under fire from Tories
A SCHEME to give first-time buyers help to get a mortgage, costing taxpayers £1 million, will be launched by Derby City Council today.
The authority's Tory opposition party says the cash could be better spent on funding beds for the homeless.
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Phil Ingall
But the council's Labour leadership says the claims are "disingenuous" as the cash they are using could not be spent on public services.
The council says it will use the money, which it would otherwise have invested in banks or building societies, to help between 35 and 40 first-time buyers.
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It will mean applicants can get a mortgage with a minimum 5% deposit as the council will contribute another 20% of the property's value as security so the interest rate is lower. Most mortgage lenders would require at least a 10% deposit.
The mortgage lender in the scheme, Lloyds TSB, will then pay the council interest on its cash. Councillor Sarah Russell, the council's cabinet member for finance, said the "sensible investment" would "kick-start Derby's economy, giving fresh impetus to the local housing market and encourage growth".
And she said the money from Lloyds TSB would yield higher returns, from an interest rate of about 2.5%, than if the authority had made other investments.
Councillor Phil Ingall, shadow cabinet member for housing, claimed the money could and should have been spent to bolster the council's "housing-related support budget". This is being cut from £6,675,000 in this financial year to £3,675,000 for 2013-14, leading to the number of beds for the homeless which the council funds dropping from 556 to 179 by October.
He said: "They are going to put the homeless on the street but they want to help 40 people buy new homes – people that could pretty much afford a house anyway."
Asked to respond, Miss Russell said the money was being "deposited, not spent", so the claims were "disingenuous at best".
She said: "The council money comes from our internal cash balances and is an amount of money that we expect to get back at the end of the term.
"The cash does not constitute expenditure for which an alternative application could be considered as we expect to get the money back; therefore, the money could not be used to fund frontline services. As such, those comparisons are disingenuous at best."
Those that qualify for the mortgage scheme would have to be first-time buyers looking to purchase a non-new-build property worth £142,500 or less in Derby. The authority says eligibility would otherwise be governed by "market forces".
People interested in getting a mortgage through the scheme can go into Derby Lloyds TSB branches for more information. Applicants will be subject to the bank's normal assessment criteria.
8 Comments
by Becks_343
Thursday, March 07 2013, 11:21PM
“'Better spent on funding beds for the homeless' That's a bit rich coming from the party that's going to make many people homeless from April with their benefits reforms!”
by MrsChristmas
Thursday, March 07 2013, 7:42PM
“err...am I reading this right! They cut a million pounds from services for the old, homeless and vulnerable, and give a million pounds to help people buy their own homes!!! Sorry, someone somewhere has lost the plot (no pun intended lol)”
by make_redgreen
Thursday, March 07 2013, 2:30PM
“The new CDO's - Council Derivative Orders.”
by janine2011
Thursday, March 07 2013, 2:00PM
“Smithy1957 if anyone defaults on their mortgage the bank is only interested in getting as much as they can, not even the full cost outstanding most of the time. They then pursue the former owner for the difference. So the council won't stand a chance of getting their money back. It's another balmpot scheme from the council at a time when there are huge cutbacks in virtually every department.”
by Wafty
Thursday, March 07 2013, 12:30PM
“Smithy1957, the article also doesn't state that they will get the money back - in fact it worryingly states that they 'expect' go get it back - given the previous history of council contracts that are so badly written that they end up costing more than they save (the incinerator and the roads maintenance to name but two), we should all be worried that they are yet again entering into something without concrete assurances that the public money will be safeguarded. ....”
by Smithy1957
Thursday, March 07 2013, 12:10PM
“janine2011, how do you know the council wont get it's money back and only the bank will ? I cannot see that referred to in the article so no doubt you have established these "facts" elsewhere. Can you point me in the direction of this information please so I can read this for myself?”
by janine2011
Thursday, March 07 2013, 10:13AM
“Another pet project, and a damn stupid one at that. If the person with the mortgage defaults the BANK will take the property and will only be interested in recouping THEIR money, they won't be ensuring the council get theirs.”
by Wafty
Thursday, March 07 2013, 8:43AM
“Sarah Russell: "we expect to get the money back" - good grief woman, shouldn't you be certain that you'll get it back rather than just 'expecting'? - what sort of protection is being put in place for this money? if a borrower defaults on their mortgage (as is possible with someone that the banks wouldn't ordinarily lend to), will the council have any hope of getting their share or will the bank take the lot?”