Deposit loans will give first-time buyers leg up on to property ladder
FIRST-TIME buyers in Derbyshire will be given a helping hand on to the property ladder through a mortgage scheme being launched by the county council.
The authority says it wants to help stimulate the property market by lending people money to pay for deposits.
The Local Authority Mortgage Scheme will see the council lend applicants up to 20% of the amount needed to secure a property.
It will allow first-timers to buy a home with a deposit of as little as 5%.
But the cash-strapped authority has yet to determine how many first-time buyers it can afford to help.
Councillor John Harrison, cabinet member for finance and management, said: "Cabinet has given its approval, in principle, for a scheme to be set up but there is a lot to be determined as to how it would operate.
"If we were able to put £3 million into the scheme, it would potentially assist a minimum of 125 first-time buyers.
"We will have to wait for the budget review before we are able to determine the level of investment we're able to put into it."
Raising a deposit is one of the biggest hurdles for first-time buyers since the 2008 banking crisis, with many lenders refusing mortgages to people whose savings are less than 20% of the value of the property they want.
The need for a big deposit combined with high house prices and higher rates of unemployment among younger people has combined to push down the number of first-time buyers.
Mr Harrison said it was therefore important that the council played its role in stimulating the housing market in Derbyshire.
He said: "It's good news for first-time buyers that we are pressing ahead with plans to introduce a mortgage scheme."
In a report to cabinet, the council's director of finance, Peter Handford, said first-time buyers were finding it difficult to climb on to the property ladder.
He added: "The requirement by the Bank of England for financial institutions to hold larger amounts of capital has made it less financially viable for banks and building societies to offer mortgages at attractive rates.
"Banks have to hold capital reserves that are eight times higher for a 95% loan-to-value mortgage than they do for one that is 75%.
"They're typically now only able to lend up to 75 to 80% on loan-to-value mortgages at attractive rates."
Derby City Council announced in October that it would run a similar mortgage scheme to help buyers. The authority will invest £1 million to help about 40 people get a mortgage on properties worth £150,000 or less.
Leader Paul Bayliss said the interest earned would be put back into the council or be used to offset any costs should they occur.