Bristol City Council is to launch a second local mortgage initiative aimed at helping more first-time buyers to get on the housing ladder in Bristol.

It follows the success of a similar scheme, started in February with LloydsTSB, which has so far enabled a total of 23 households, who are able to afford mortgage payments but not the 25 per cent deposit currently sought by lenders, to buy a first home.

It is hoped that the new undertaking, in partnership with Leeds Building Society, will help a similar number of households who will be able to purchase either a new-build or older property.

The key aspect of the scheme is that lenders now typically ask mortgage applicants for a deposit of 25 per cent. Applicants to the council-backed Local Mortgage Scheme need only a five per cent deposit.


This means that successful applicants, who can afford mortgage payments but not a substantial deposit, can be assisted in buying their first house or flat.

These successful borrowers will also benefit from lower interest rates making their mortgage payments less expensive as well.

Councillor Anthony Negus, Cabinet Member for Housing, Property and Regeneration, said: "The clever part is that we can do this by switching money, £1 million, from council reserves, which is in one account, into another deposit account with our partner, earning taxpayers a higher rate of interest in the process.

"Because the money we deposit with the lender earns a higher rate of interest, the return offsets the very low risk that the council faces as the underwriter of the scheme, in the event that one of the buyers was to default on payment.

"This is about finding innovative ways of helping people into homes in the current challenging economic climate. No-one is pretending that this is the answer to the current housing situation.

"There is no single or easy solution, but it is one of many successful schemes that we have come up with to offer help.

"By targeting resources on a key obstacle that is preventing more people from entering the housing market, we can make a bigger bang with our buck.

"And this, in turn, will create a ripple effect, freeing up housing to meet demand and, hopefully, help stimulate the current stagnant housing industry."

(CD)