Southampton City Council Press Releases
Council plan to get first-time buyers on housing ladder gets green light
Cabinet has approved a scheme to help first-time buyers who are looking to buy a home get onto the housing ladder. This innovative scheme could help many more residents secure a home, which is one of Southampton City Council’s key priorities.
The scheme would be the first of its kind in Southampton and could be in place later this year. This will allow first-time buyers who want to buy an older home get a 95 per cent mortgage on similar terms as a 75 per cent mortgage but without the large deposit that is normally required.
At the moment many building societies and banks require large deposits to secure a mortgage and this can be difficult for people who want to buy their first home but do not have enough savings to make the deposit. The council scheme proposes to help people who can afford mortgage repayments but do not have the money they need to put down to secure their home - by helping them with an indemnity for up to 20 per cent of the total value of the mortgage with the lender. Only in the worst case scenario if the borrower fails to make the repayments or breaches the terms of the mortgage and the property is sold at a loss would the council’s responsibility kick in.
Whilst Cabinet approved in principle this scheme subject to the resolution of a few remaining issues it will go to full council in May for full approval.
Barbara Compton, Senior Manager- Skills, Economy and Housing Renewal, said: “This scheme provides a relatively low risk opportunity for us to help first-time buyers onto the housing ladder while assisting the local housing market and relieving local demand for social housing.”
Sector Treasury Services ran pilot schemes with several local authorities in 2011. Cecilia Booth, company director said: “The combination of relatively high house prices and understandable caution over lending from banks and building societies means that many potential first-time buyers are unable to save a sufficient deposit even though they could afford mortgage repayments on a typical first home.
“This initiative is designed to bridge that gap. More people will be able to take the step of buying their first home, stimulating the local housing market and benefitting the wider local economy. “
Only first-time buyers with a minimum five per cent deposit who can meet the repayments on a 95 per cent mortgage will be eligible for the council scheme, should it get the go ahead.
The potential buyer will also need to meet the normal criteria of the mortgage lender.