Local Councils Able To Offer Mortgage Loans
We reported recently about how local councils were planning to lobby the Government to grant funding so that they were able to offer mortgages and home loans to those who most needed help with funding their house purchase, or were struggling with their existing home loan.
But now the New Local Government Network (NLGN), the body which is behind the original proposal and has been lobbying the Government, has announced that local authorities do not actually require permission from the Government to offer loans, as they already hold the authority to do so under existing legislation.
According to the NLGN, local authorities already hold the ability to offer mortgages and home loans under powers granted by the Government in 2000, as long as this would be for the general benefit of the local community.
This freedom has been granted under what is called “the power of well being” and this ruling gives local councils permission to act as a lender where no other option is available for the borrower.
The only requirement is that councils would have to lend at a fixed rate of interest on the loans of 6.85%, which would actually be an extremely competitive rate, bearing in mind the type of borrower who would be likely to benefit from the scheme, i.e. first time buyers who couldn’t get a mortgage loan elsewhere and those existing borrowers who may be facing repossession by their current lender.
The NLGN has already obtained support for the scheme from councils in Portsmouth, Liverpool, Manchester, Lambeth and Hackney and are also raising interest from other local authorities, although some councils are still waiting for full Government approval.
If the scheme is to go ahead, the NLGN estimate that it will be of benefit to approximately 15,000 individuals across the country, who otherwise may not be able to obtain the loan they require.
