Agenda item

Report number HOF186 by the Strategic Director – Corporate Focus.          (Enclosure)

Report number HOF186 by the Head of Finance on the Local Authority Mortgage Scheme (LAMS) was circulated with the agenda. It asked the PDG to consider a local policy for scheme eligibility. The Cabinet had made an ‘in principle’ decision to proceed with a local scheme and asked the PDG to determine the criteria and policies in which the scheme would operate. Recommendations would be considered by Cabinet at its meeting on 6 February 2012 before being forwarded for the consideration of Council on 1 March 2012.

The Research and Policy Officer provided a summary of the information appended to the report, highlighting details of the rate of property sales, prices and property types. To achieve the best interest rates, based on the average property selling price, a deposit in the order of £27.5k would be required.

Members considered all of the policy areas highlighted in the report.

The area of the district, determined by postcode, to be covered by this scheme.

Councillors agreed that the scheme should apply to all properties that were defined, by postcode, to be within the boundary of South Kesteven. Concern was raised over confusion that could be created when using postcodes to determine a property’s eligibility; examples were given of postcodes in certain areas that straddled local authority boundaries. It was suggested that maps could be used to support and clarify the scheme’s boundaries.

Recommendation:

The scheme should be open to first time buyers looking to purchase properties where the property is located with the boundary of South Kesteven district.

The maximum loan size to be supported

Councillors proposed capping the property price to which the scheme applied. They considered income levels across the district. An initial suggestion of a cap at £140,000 was made, however after discussion Councillors felt this ceiling would open the scheme to too wide an audience. A further suggestion was made that the top price should be set at £125,000. This was the expected level of stamp duty for first-time buyers from 1 April 2012.

Recommendation:

The scheme should be available for properties priced up to and including £125,000.

Confirmation of first time buyers only

The PDG agreed that the scheme should be open to first time buyers only.

Recommendation:

The scheme should only be available to first time buyers.

The size of the initial scheme

Councillors discussed the size of the scheme. They considered it appropriate that an initial ‘pilot’ phase should run, with £1m in funding committed to it.

Recommendation:

The scheme should run for a period as a pilot, with available funding of £1m.

Preferred initial partners

Councillors considered different partner options. The potential partner most experienced in operating LAMS was Lloyds, however their scheme could not be used for the purchase of new build properties. PDG members felt this would dovetail with the scheme run by the government, which solely provided support for the purchase of new build properties. A further advantage of Lloyds was its national standing. This would make it easier for people not resident within the district and looking to move to South Kesteven to access the scheme.

Several local building societies had approached the council and asked how they could be part of the scheme. In order for them to be involved, they needed to apply to Sector (an independent financial organisation supporting the scheme’s implementation). Other organisations were already registered, however Councillors considered these options were limited by availability of local branches within the district.

Recommendation:

·         The scheme should not be available for the purchase of new build properties.

·         For the pilot phase, SKDC should partner with Lloyds, as the most experienced provider of LAMS. It was further recommended that cash should be deposited with the lender in order to maximise the return on the investment.

PDG members considered whether there should be a charge for administration. This could cover the costs associated with publicising the scheme. After discussion, Councillors agreed that the majority of the administration work would fall to the provider. Councillors also felt it was not appropriate for the Council to provide advice, suggesting this would be better coming from an independent mortgage adviser. They were concerned about the potential risks to which the Council would be exposed if it provided an advice service.

Recommendation:

·         That there should not be a charge for administration.

·         That the Council should not provide an advice service

Further discussion of the scheme ensued. Councillors questioned whether there would be opportunity for people to access the scheme when they could afford to buy a property, consequently blocking access for people to whom it could make a difference. They noted the government’s First Buy scheme limited applications to those with a household income below £60,000.

Recommendation:

Negotiations should be undertaken with the scheme provider about whether it would be possible to refuse applications from households with an income over an agreed level.

The scheme would be advertised on the Council’s website. Further awareness of the scheme, particularly on a national level, could be generated by the provider. Committee members felt strongly that the scheme should only be for owner-occupiers, rather than the buy-to-let market.

Recommendation:

That the scheme should be reviewed fully after the initial £1m is exhausted.

16:05-16:08 – meeting adjourned.