Southampton City Council is the latest to look at launching a mortgage indemnity scheme to help first-time buyers with small deposits.
Under the scheme, Southampton council will underwrite up to 20 per cent of the mortgage through an indemnity as long as the borrower has a 5 per cent deposit. In theory, this means borrowers will be able to get a 95 per cent mortgage on similar terms to a 75 per cent mortgage.
The Government launched its NewBuy mortgage indemnity scheme in March, where lenders offer 95 per cent loan-to-value loans on newbuild properties against a mortgage indemnity guarantee funded jointly by the Government and builders of up to 9 per cent of the property value.
The Southampton scheme, which could total around £1m, would not be limited to newbuilds.
The scheme’s details are being finalised and will be put to the full council on May 16 for approval.
The idea of a local-authority-backed scheme was first proposed by Sector Treasury Services, part of the Capita Group, in March 2011.
So far, 20 local authorities have launched similar schemes, including Blackpool, Warrington, Liverpool and Bristol. STS says 60 more authorities have signed up to the scheme and a further 250 are considering joining.
Southampton-based Lentune Mortgage Consultancy director Stuart Gregory says: “The best thing about this is it is not limited to newbuilds so people have a choice of properties.”