First-time buyers who are struggling to save a deposit will soon be able to get help from local authorities as part of a new scheme.
The scheme is aimed at individuals that can afford mortgage repayments, but cannot afford the deposit for a property.
Under the scheme, local councils will provide security of up to 20% of the property’s value, which will be held with the lender and on which interest would be paid, enabling buyers to qualify for a lower mortgage rate.
They would still borrow up to 95% of the property’s value meaning they would own it outright, unlike a shared ownership scheme.
The local authorities Blackpool, East Lothian, Newcastle Under Lyme, Northumberland and Warrington will be piloting the Local Lend a Hand scheme.
It is possible that ten more councils will offer the scheme in the next month.
Lloyds TSB Mortgages is the first lender to sign up to the programme, and has adapted its current Lend a Hand product where parents can put up to 20 per cent of a property’s value into an account as security for the loan.
Now it is the local council that will provide this money, and first time buyers will only require a minimum five per cent deposit for the property.
Interest rates have not yet been decided, but Lloyds have said they will be similar to their Lend a Hand product, which include either a fixed-rate of 5.09 per cent for three years, with a £895 fee, or a rate of 5.79 per cent with no fee.
Lloyds TSB’s traditional range offers a rate of 5.99 with a 10 per cent deposit, meaning the new scheme gives cheaper rates.
Each local authority will decide on the maximum amount they will lend, and also which places in their area the scheme will be available.
Housing Minister Grant Shapps said: “I’m delighted to see that those on the front line of building homes and providing mortgages are stepping up their efforts to help aspiring first-time buyers get a foot on the ladder.”
First-time buyers can visit their local Lloyds TSB branch to find out if the new scheme is available to them.