Agenda item

Report number HOF229 by the Head of Finance.                          (Enclosure)

Hayley Sullivan an Associate Director from Sector gave a brief presentation providing a local and national update on the Local Authority Mortgage Scheme (LAMS).

National picture

·         LAMS was a partnership between commercial mortgage lenders, Sector and participating local authorities providing 95% loan to value mortgages for first time buyers.

·         LAMS was available in 52 local authority areas under 67 live schemes with over 35 new schemes due for launch.

·         8 commercial lenders had signed up to the scheme.

·         At the end of February 2013 over 1500 mortgages had been issued, equating to £157m in lending.

Alternatives to LAMS

·         NewBuy – launched in March 2012, available nationally to first time buyers for new build properties. This was restricted to specific sites and properties and provided 95% loan to value mortgages.

·         Help to Buy Equity Loan – to be launched in April 2013 replacing FirstBuy. The scheme would provide an equity loan of up to 20% of the property value repayable once sold. The scheme was open to all buyers for new build properties.

·         Help to Buy Mortgage Guarantee – due to be launched in January 2014 aimed at all buyers and property types providing loan to value mortgages between 80-95% with a government backed guarantee of 15%.

LAMS in South Kesteven

·         The Council deposited £1m to cover a maximum loan size of £118,750 (£125k property with a 5% deposit), this meant a maximum indemnity per mortgage of £25k. Return on the deposit would be approximately 4.5%p.a. for the five year period.

·         The scheme was available for properties whose postcodes fell wholly within South Kesteven (excluding new builds) and was launched on 5 July 2012.

·         Sector provided monthly management information which detailed the numbers of mortgage applications, mortgage offers, mortgage completions, mortgage arrears of 3 months or more and repossessions.

·         Since the launch of the scheme there had been 21 applications with a value of £1.9m. The indemnity that had been utilised was £365k.

·         1 mortgage was at the offer stage, a further 14 had been completed.

·         The PDG was given an overview of the average level of indemnity, loan value, property value and information about applicants (average age, type of property purchased and whether they were already resident within the district).

Ms Sullivan reported that overall performance of South Kesteven’s scheme was slightly slower than the average rate of utilisation and suggested this might be because of the maximum loan value. She commented that the £118,750 limit may make it more challenging for buyers looking at properties in Bourne, Stamford and the Deepings, where property prices were higher than Grantham. If the Council wanted to speed up use of the deposit it could reconsider the level of the maximum loan.

If the Council wanted to make further deposits beyond its current £1m, it would have to create a new scheme; the current scheme could not be ‘topped up’.

Councillors were also provided with a summary of the Local Authority Partnership Purchase pilot, which was a national affordable housing scheme. Buyers would need a 95% deposit on 70% of a property’s value to form a 70/30 shared ownership arrangement. The sign-up fee for LAMS would give the Council access to this scheme when it was formally launched.

Members of the PDG were given the opportunity to ask questions about the scheme:

·         Aborted applications and incomplete applications were not recorded by the mortgage provider and consequently not captured in the monthly reports.

·         Nationally the scheme had not had any defaults or repossessions however this was most common during years 4 and 5.

·         If an individual fell into arrears, the scheme could be extended for an additional two years for that individual. Sector was finding a way to share information on individuals at risk of defaulting to signpost them to the appropriate people in their local council for support.

·         LAMS applicants could transfer their mortgages to get better rates but they would no longer be part of the scheme.

Brief consideration was given to the maximum loan value. When the scheme was set up, Councillors had researched property prices across the district. The majority of members of the PDG agreed that the level was appropriate. Any changes to the current scheme or any new scheme would need approving by the full Council.