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Local authority mortgage scheme delayed
A scheme to use council cash to help first-time buyers in Watford get on the property ladder has been hit by delays.
At a meeting last night, politicians heard that the local authority mortgage scheme, which will help reduce deposit sizes for borrowers, has run into legal problems and is yet to have its funding agreed.
The news comes as councillors expressed scepticism about the scheme that will only help around 30 people in the town.
Last night Watford Borough Council ’s ruling cabinet agreed to pursue the scheme, which will help people secure mortgages of up £190,000 on properties worth up to £200,000.
The scheme is aimed at first time buyers who would have been eligible for a 95 per cent mortgage before the recession.
This means buyers would have only be asked for five per cent of the value of the house up front as a deposit. So on a £200,000 property they would only have to find £10,000 as a deposit.
However, a report said since the banking crisis, the maximum that lenders were prepared to give was 75 per cent mortgages, meaning the prospective buyers of a £200,000 property would now have to find £50,000 upfront.
The idea of the scheme is to close the gap by councils guaranteeing the difference between the 75 per cent and 95 per cent deposit meaning those who were eligible for the cheaper deposit before the recession can still obtain one.
Conservative councillor Steve Johnson said he was sceptical about the need for the scheme as his son had just bought his first house and they had found many banks and building societies willing to provide 90 per cent mortgages.
He said: "This (lenders only willing to give) 75 per cent was true six month ago, but I question the need for this now.
"PR-wise it is fine, but realistically it doesn’t go anywhere."
Dorothy Thornhill, Watford’s Liberal Democrat elected mayor, also voiced scepticism over the effectiveness of the scheme.
She said: "I am sceptical about this scheme and schemes that governments come up with in order to make it sound like they are solving a problem when you hear it on the Today programme.
"I am cynical about schemes that only help a few people. But good luck to the 30 people who get on this scheme."
Councillor Nigel Bell , the leader of the Labour group, added that he agreed the council needed to be cautious with the scheme but thought it should do something to help first-time buyers.
In Hertfordshire the county council is funding the project and has earmarked £12m for it, with £2m going to its own scheme and £1m to each of the county’s districts and boroughs.
Only a number of banks are participating in the scheme and Hertfordshire County Council and Watford has opted to partner with Lloyds TSB.
However a report said there was a hold-up with scheme as Lloyds had asked each of the councils involved to provide a letter confirming it has all the legal powers required to participate.
Watford Borough Council said it had concerns about the letter and was possibly looking at switching its scheme to The Leeds Building Society, which has a branch in the town.
Borough officers also said the agreement to secure the £1m from the county council was not yet in place.