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Lloyds links with local authorities to offer 95% mortgages for FTBs

Lloyds TSB has unveiled a mortgage product which allows first-time buyers to purchase a home with a deposit of 5 per cent alongside support from a number of local authorities.

Under the scheme the buyer puts down at least 5 per cent of the value of the property and uses the Lend a Hand mortgage for the remaining amount. The local authority then provides a cash backed indemnity of up to 20 per cent of the property value as additional security and will earn interest on this amount.

Local authorities will agree where in their area the scheme will be available. Subject to lending criteria being met, the bank will then offer first-time buyers loans of between £25,000 and £350,000. The maximum loan size will be dependent on the local authority.

Lloyds TSB head of mortgages Carol Anderson says: “By developing Local Lend a Hand and working with local authorities across the UK, we’re broadening the prospect of home ownership to even more first-time buyers.”

The bank is currently working with local authorities including East Lothian, Blackpool, Warrington Newcastle under Lyme on the initiative, although it plans to establish the scheme across the UK this year.


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. What an absolute disgrace asking our cash strapped local authourities to underwrite these loans with tax payer money.

    how about the banks get sensible with lending, and take the risk themselves or with the Higher Lending Charge/MIG like in the past.

  2. I know that this may be a controversial point of view, but I think all subsidies to the housing market should be banned, as they help to artificially inflate the housing market. If the housing market is meant to be based on supply and demand then surely if people are struggling to get onto the housing market or sell their property then a correction in the price is due. It is obvious that banks would like to have additional security when looking at lending and if government organisations are stupid enough to give them this additional security then all you do is inflate house prices and cause another boom. You only have to look at house prices between 1997 and 2007 to see what reckless lending has done in the past.

    Government should be more interested in building social housing and not subsidising the private residential market. Subsidies in this marketplace always have unpredictable consequences.

    I for one think it is about time that we all got used to mortgages not been so freely available particularly at high LTVs. After all lower house prices are not always a negative in fact there is a lot of positives to be had from a more stable housing market. People need to recognise that houses are not investments – they are somewhere where you live and if people want to save for their retirement than they need to invest money in other I vehicles, homeownership is only part of one’s overall wealth.

  3. Carlton Nembhard 16th March 2011 at 12:17 pm

    I to totally agree with your comments Peter, if people cant afford to save for a deposit, how are they going to afford to maintain their mortgage payments along with everything else that comes with running a home. Credit cards, loans etc? Sounds familiar!

  4. Brilliant business move by Lloyds. Locking in and top slicing FTB’s and securing large sums on deposit from Local Authorities who can say they are not giving money away to anyone. Those councils can shift people off of their burgeoning waiting lists that have grown as a direct result of the mortgage famine.

    When did property prices hit rock bottom, that wll be yesterday. Watch BTL buyers pile in to the same property segment – values are now a one way bet.

  5. I have to agree with Messrs. Haggerty and Herd.
    There should be no support for mortgages in this way. local authorities should not be allowed to issue indemnities in this way as it is just another way of the lender passing the risk to the public sector. Not only are these organisations ‘too big to fail’, so they already have a guarantee for their whole business but they are now successfully passing on the first 20% of their risk again to the public sector.
    Makes excellent business sense for Lloyds but local authorities should NOT be allowed to enter into such agreements.
    What is the benefit to the local authority anyway, other than possibly moving a number of people off their housing lists. People who probably are questionable as owners anyway!!

  6. Although I agree with the comments regarind the way this is being done, I disagree with the comment by Carlton ‘if you cannot afford to save for a deposit, how will you afford mortgage payments etc’ From a personal perspective I am trying to save for a deposit for a mortgage however if you are currently paying rent plus the normal household expenditure it is very hard for people to also try so save enough for a deposit to purchase a property. I can afford to maintain the rent and household expenditure but to also save tens of thousands of pounds in this climate is pushing a budget a little too far.
    I agree there are betters ways to provide mortgages than the schemes above and I for one would be very willing to learn of a better way.
    There are people I know who just take the easy route and get a council house, however I want to pay my way and never want to rely on this, yet I feel I am being punished for others failings in the past (credit crunch) for trying to do so.

  7. I agree completely with Nathan Jones

    I myself will be a FTB in the next year or two and trying to save a deposit isn’t easy whe also payin £625 rent along with other bills.

    I just hope this is still around when I have enough saved.

  8. The people responding negatively to this article I think need to take a step back and think about how times have changed.

    My partner and I have been looking at getting onto the property ladder for two years now. We both have secure full time employment, no debts what so ever and very healthy credit scores for our ages (early twenties respectively)

    However, we also rent where we live and pay for all the costs associated with renting. At the end of this, there is not enough to save a substantial amount that the lenders require.Could you imagine paying your mortgage, and being asked to save an extra 20k on top of that too?

    This scheme would suit us perfectly, we could put down a smaller depost, have reasonable mortgage repayments, enough to cover the costs associated with moving and the authorities would benefit too from the interest, at the same time we wouldn’t be spiralling into debt – which is common amongst first time buyers.

    First time buyers are in a trap at the moment, if you have a small deposit, the range of mortgages are very limited – mostly with ridiculous interest rates. Could you imagine being put in that position? This scheme is a brilliant idea, and as with most things, will have its pros and cons.

    Lets not forget that times are tough at the moment, so anyone considered for it, will as above, be subject to a strict lending criteria.

    We are in a better financial positon than the majority of the economy at the moment, but it’s just the deposit which holds us back. I hope this is rolled out and available when we’re in a position to buy, as someone else has already raised.

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