City lends a hand to first time buyers

 

It has already helped over 50 first-time buyers secure a house – now, Liverpool’s ‘Lend a Hand’ scheme is set to benefit even more people, thanks to major city council investment.

The council is giving a big boost to house buyers with a £1 million investment in the second phase of the special mortgage scheme, set up in partnership with Lloyds TSB.

Launched in March 2012, the first phase of Lend a Hand saw the council placing an initial £1 million with Lloyds TSB to underwrite ‘top-ups’ of up to 20 per cent on mortgage loans.

It meant Lloyds TSB could boost the amount made available to first time buyers, offering them 95 per cent mortgages on similar terms to a 75 per cent mortgage, but without the need to provide the large deposit usually required.

The scheme has been a massive success, with 55 local families already snapping up the offer and securing their first home. The council is now aiming to build on that success by investing a further £1 million to extend the scheme, helping many more people take their first steps on the property ladder.

Liverpool City Council’s Cabinet Member for Housing, Councillor Ann O’Byrne, said: “Our Lend a Hand scheme is making a real difference to house buyers in Liverpool, and it’s great news that we’ve already been able to help so many people get onto the property ladder.

“This additional investment means we’ll be able to help many more local families move into their first house. It’s about helping people overcome the difficult economic times, supporting first-time buyers who are finding it increasingly difficult to become home owners, and stimulating our housing market.

“This is another great example of how we are working creatively with partners to deliver services which improve people’s lives. We’re looking forward to continuing to work with Lloyds TSB, taking advantage of their mortgage expertise, to make this next phase of the scheme a massive success.”

Raising a deposit has become a major hurdle for many first-time buyers, because, in the current climate, most lenders are only prepared to lend a maximum of 75 to 80 per cent of the value of the property, even if the applicant can afford a 95 per cent mortgage. This means applicants require a substantial initial deposit, which is out of the reach of many.

By taking on the role of ‘helper’ through the Lend a Hand scheme, the city council is helping relieve the burden on housebuyers. It means that, for a £100,000 property, buyers only have to pay a deposit of £5,000, rather than £25,000.

Marc Page, mortgage director at Lloyds TSB, said: “The aim of Local Lend a Hand is to make the housing market more accessible to first-time buyers in Liverpool. It’s great to see that the scheme has already helped a number of people into their new home so quickly, and is now able to help even more.

The excellent take-up shows that Lend a Hand really is providing a solution for people that might otherwise be put off by the size of deposit they would need. Now that the funding has been extended, we would urge first-time buyers to come to us and find out more.”

The money invested in the scheme from the city council is placed in a high interest account which can be used to cover any defaults in payments from lenders. The indemnity would only be called upon if a loss is made by Lloyds TSB. Any interest made by the council is ploughed back into the scheme to help fund further mortgages.

Subject to Lloyds TSB’s usual lending criteria, first-time buyers are able to select a property within the local authority area, and borrow up to a maximum loan size of £125,000. They will put down a minimum 5% of the property price, and the city council will provide a cash backed indemnity – in place for a fixed five-year period for each mortgage granted – of up to 20%, as additional security.

The scheme specifically targets older houses in the city and is not available for new-build properties. The scheme is also not available for buy-to-let or right-to-buy purchases.

Those interested in the scheme should visit their local branch of Lloyds TSB for more information.

 

How Liverpool’s Lend a Hand scheme works

• The scheme is for loans between £25,000 and £125,000.
• The first-time buyer will put down at least 5% of the value of the property, and get the Local Lend a Hand mortgage for the remaining amount.
• The local authority will provide a cash backed indemnity of up to 20% of the property value as additional security. Interest will be earned on this amount.
• The first-time buyer will own the property in its entirety (unlike shared ownership schemes)
• The fixed rate mortgage products that will be available for first-time buyers during this scheme will be at a lower rate of interest than would normally be available for this level of deposit, helping them with the cost of their monthly payments.
• In the event of repossession and subsequent shortfall sale, LTSB will call on funds provided by the local authority to make up the shortfall.