Local authorities are prevented from lending below a minimum level, known as the standard national rate. Until recently the SNR has been too high for local authorities to compete with commercial lenders.
But in the latest white paper on mortgage lending from Exact, managing director Alan Cleary says as the standard national rate has now fallen to 3.93 per cent – its lowest ever level – the Government should be diverting funding to local authorities as a way of boosting the mortgage market.
The firm argues that specialist lenders should white label mortgage origination for local authorities, taking some pressure off the main high street banks, which Cleary says the Government is relying on.
Cleary says: “Reinstating local authorities as mortgage lenders would mean the government can bypass bank red tape and get cash back in the hands of people who want to buy houses. At the moment, the government’s relying too heavily on just one part of the mortgage market – the big high street banks.
“If the Government is serious about boosting the cash available to borrowers in the street, why don’t they give some of their billions to local authorities, who could lend to consumers using specialist lenders’ origination expertise? This would put taxpayers’ cash directly into the hands of the people who will spend it.”