Business leaders immediately welcomed the move as a way to help boost the city’s economy.
A Leeds, York and North Yorkshire Chamber of Commerce spokesman said: “Anything which helps stimulate demand in this part of the housing market is welcomed by the chamber, as it in turn will stimulate construction. This is positive action on the part of the council which clearly recognises the need to get the local economy moving.”
With many building societies requiring deposits of 25 per cent or more, many people who could afford mortgage repayments struggle to secure a mortgage.
Under the Helping Hand initiative, the council will act as guarantor for four-fifths of the deposit with the purchasers supplying the other one-fifth.
On a property of £100,000, the buyers would have to put in a deposit of £5,000 with the society providing a 95 per cent mortgage.
To support the scheme the council intends to deposit £2m with the Leeds – the first tranche to be handed over will be £1m – on which it will receive interest.
There will only be a call on the money if the buyer defaults, leaving the society facing a loss.
The council estimates each house purchase unlocks a chain of up to five transactions so, that on a house price of £160,000, 155 people are helped for each £1m of indemnity provided.
The new 95 per cent mortgage is a five-year fixed rate at 5.49 per cent, with discounted fees and a free valuation. Normal lending criteria will apply, so only those who can comfortably afford to make repayments will benefit. The Helping hand mortgage is available to first-time-buyers only in Leeds and some areas with a Bradford and Wakefield postcode.
Leeds Building Society chief executive Peter Hill said: “We support the local communities around our branches and we have a national presence, so we know that other local authorities will follow Leeds City Council and form a similar partnership with us in the near future.”
Council leader Councillor Keith Wakefield said, “Everyone knows how difficult it is for young people to finance a large deposit to buy their first house. This scheme will help first-time buyers get on the first rung of the property ladder by reducing this lump sum to more manageable levels. It will hopefully make a real difference to people’s lives and also provide a boost to the Leeds housing economy.”
Call 08450 540 994 for details.