First time buyers in Manchester are about to get a helping hand. Manchester City Council is currently developing a mortgage guarantee scheme that will potentially enable first timers to secure a 95% home loan on terms reportedly similar to a 75% mortgage, without the need to save a substantial deposit. The council is reportedly in negotiation with the Co-operative Bank and Manchester Building Society to develop the scheme, set to launch this autumn. Details are to be finalised, as is qualifying criteria.
The aim is to boost the number of housing completions through a scheme which provides 250 new homes in five sites across the city. Over the last five years, a lack of mortgage finance has seen house sale completions drop by over 75%. The scheme involves creating a new model which will use publicly owned land assets with finance from the Greater Manchester Pension Fund. If successful, it will be used as an investment model for other areas in England.
The council would set up a business partnership with the Greater Manchester Pension Fund to provide finance for building costs on the five publicly-owned sites in Chorlton, Wythenshawe and Gorton.
Council heads reportedly claim that the mortgage guarantee scheme will help potential homebuyers by underwriting up to 20% of their loans for a fixed period of five years, which could potentially increase to seven.
Sir Richard Leese, head of Manchester city council, told the Guardian: “We are developing the Manchester Mortgage and are in discussions with the Co-operative Bank. It is about how we address the issue of first time buyers who can’t afford a deposit. We are finding a way of the council underpinning a first time buyer mortgage. Without being imprudent, there is no risk to council payers. We will work at providing affordable properties.”
Further announcements regarding the launch of the Manchester Mortgage are expected in the coming weeks. According to the Manchester Evening News, the council’s executive has given the green light for the scheme in principle. A report with full details of the scheme is to go before members for approval in September.
Manchester isn’t the only area to consider such a scheme. Similar schemes have been launched in Liverpool and Kent is also about to launch a council mortgage scheme worth £24million which aims to help 800 first time buyers enter the property market.
Sources: Guardian online, Localgov.co.uk, Manchester Evening News.