The scheme, designed to help first time buyers secure mortgages, was launched in March 2011 following a pilot study with other local councils.
Under the scheme, the Council would act as guarantor for first home buyers on up to 20% of their mortgage, offsetting the current requirement for them to have a 25% deposit, a hurdle many face as a result of the global financial crisis.
Though the it could face costs if home buyers supported by the scheme default on their loans, the Council would earn interest on money deposited with participating lenders to support the scheme, providing a buffer against losses.
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The only lender currently participating in the scheme is Lloyds TSB, but it is expected that other banks and building societies will sign up.
John Richards, the Council’s Assistant Director of Housing, said: “The combination of relatively high house prices and financial institutions being cautious against over-lending has meant that first time buyers can find it difficult to find the deposit for their first home.
“The Local Authority Mortgage Scheme is designed to bridge that gap allowing people to get on the housing ladder thus stimulating the housing market and benefitting the wider economy.”
Chair of the Policy and Resources Committee Stephen Hagan said: “I welcome the recommendation made by Committee today to sign up to this scheme. It has great potential to assist young people in Orkney onto the property ladder, which in turn can help chip away at affordable housing shortages and keep our young families in the county.”
The recommendation will be considered by Full Council on May 10.
If approved, it’s expected the scheme would be available from mid summer and would be advertised by the participating lenders.
(GK/KMcA)
