The Isle of Wight Council, working in partnership with Lloyds Bank, has established and launched a £1million first time buyer fund to help Island residents take their first step on the property ladder and provide a much-needed boost to the local housing economy.
Through a Local Authority Mortgage Scheme called Local Lend a Hand – already successfully underway elsewhere in the country – the Isle of Wight Council can help would-be home owners bridge the gap between the mortgage deposit they are able to raise and that required to secure an agreed mortgage.
A £1 million returnable indemnity fund has been lodged by the council with Lloyds Bank, which is administering the scheme on the authority’s behalf. This fund underwrites the deposits and remains with the bank earning interest that is reinvested in the scheme. The initiative is aimed at those people who are able to afford monthly mortgage payments on a property to meet their needs, but are currently unable to raise the level of deposit required to secure a mortgage in the first place.
It is hoped that as well as offering vital help to potential homeowners, the scheme would also send positive ripples throughout the wider economy and in the housing market – releasing rented properties for those families in need of somewhere to live.
Subject to Lloyds Bank’s usual lending criteria, borrowers are able to select any existing property (excluding new builds) in the area covered by Isle of Wight Council up to a maximum loan of £150,000. First-time buyers will put down a minimum five per cent of the property price, and Isle of Wight Council will provide a cash backed indemnity of up to 20 per cent as additional security. The local authority then earns interest on this amount.
Councillor Gordon Kendall, Cabinet member responsible for health, community and adult wellbeing, said:
“A major obstacle preventing Island people buying their first home is that they can often struggle to raise the size of deposit required by lenders before they will agree a mortgage.
“This new scheme will help buyers overcome the hurdle of needing to save a very large deposit to put down on a property. With support from the Local Lend a Hand scheme, the deposit they will need to raise could be as low as five per cent – rather than a prohibitively higher figure which might otherwise be required.
“A further advantage with this initiative is that mortgage payments will be more affordable because those participating in the scheme will benefit from a lower interest rate than would normally be available to customers with a small deposit.”
It is estimated that the scheme will initially help around 40 first-time buyers onto the housing ladder, although if successful the released indemnity could be subsequently reinvested in support of additional home purchasers on the Island.
Councillor Kendall continues:
“The scheme does not promote reckless lending or provide un-affordable mortgages – it simply reduces the value of deposit currently required. Safeguards are put in place to protect the council’s interests and minimise the risks of defaulting by ensuring that mortgages are only granted to those potential homeowners who are clearly able to meet the monthly payments.”
Marc Page, mortgages director at Lloyds Bank, comments: “With the launch of Local Lend a Hand on the Isle of Wight we’re making the housing market more accessible to more people. Helping people to buy their first home is crucial in achieving and maintaining a sustainable housing market.
Local Lend a Hand addresses some of the real problems that prospective buyers on the Isle of Wight might face.”
Those interested in the local scheme should visit their local branch of Lloyds Bank for more information.
Photographed by Isle of Wight Council – Joanna McKie (center) gets advice about a mortgage from Lloyds Mortgage & Protection Advisor Michelle Williams (left) and Isle of Wight Council Housing Project Officer Jackie Johnson (right).