Local Authorities In A Better Position To Offer Homeowner Loans
Last year the Government was proposing a plan for local authorities to be able to offer mortgages or homeowner loans to residents living within their area.
The New Local Government Network (NLGN) has been campaigning for some time now for councils to be granted the authority to provide homeowner loans for those who most need them in the local community, such as first time buyers and those who may be currently struggling to keep up with the repayments on their existing loan.
A large number of local authorities have been keen to adopt the proposed scheme, however up until now the rate of interest which councils would have to pay to the Government on the loans was too high for the scheme to be able to offer competitive rates to potential borrowers.
The standard national rate of interest charged by the Government stood at 5.07 per cent since November last year (before this date it was 6.89 per cent), but just this week the rate has been reduced to 3.93 per cent, which means that councils who opt for the scheme will be able to compete with banks and building societies on rates.
This idea is nothing new, local authorities were able to offer homeowner loans to local residents back in the 1980’s and the NLGN have welcomed the reintroduction of the scheme, as they claim it will provide a much needed boost to the housing market in local communities and help to ease liquidity in homeowner loans, as the money markets are more likely to trust loans which are backed by the Government, rather than the main high street lenders.
Chris Leslie of the NLGN said “Councils used to be in the mortgage business until the 1980’s when this facility was wound down by the Government, as it was then assumed that the private banks could cope. We now know that a diversity of mortgage provision is needed to prevent the current crisis.”
