GLASGOW, Scotland–The city council ‘s executive committee has approved a new and unique partnership mortgage guarantee scheme between the local authority and Glasgow Credit Union.
This two-year pilot scheme will offer prospective home owners who could afford to pay a mortgage, but have insufficient means of raising a deposit, with the opportunity to own their own home. Typically, this deposit represents 5% – 25% of the value of the property and is a barrier to many people, noted proponents of the program.
The scheme will see Glasgow City Council and Glasgow Credit Union allocating up to £4 million in mortgage funding over the period. Glasgow Credit Union will provide mortgages at 100% of the value of the property.
Councillor Gordon Matheson, leader of Glasgow City Council, told local media that “This is a fantastic scheme, giving people in Glasgow the chance to own their home when otherwise they could not. It is the only scheme of its type in Scotland – a unique partnership between a local authority and a credit union to deliver such a service. We are delighted to work with Glasgow Credit Union on this pilot project, which helps to tackle the changing needs and demands of housing all across the city in a number of ways.”
The council will act as a guarantor for the loan over a maximum five year period, up to a maximum of 20% of the original mortgage amount in the first year, reducing to 10% by year five. If the buyer was to repay 20% of the mortgage within a shorter timescale then the guarantee would no longer be required.
An incentive will be offered to those considering buying homes which have been vacant for some time. In line with the priority allocated to bringing empty properties back into use, the council will be prepared to meet the first £500 of buyers’ costs where they acquire a property that has been noted on the council tax register as empty for the last six months.
“For many people, especially the younger generation, saving enough for a deposit for their first property can be an impossible task,” added June Walker, chief executive of Glasgow Credit Union. “It’s frustrating for them that they often pay more in rent than they would as a monthly mortgage repayment, but because they don’t have a large deposit to put down on a property, they’re excluded from becoming home owners. This innovative scheme will provide them with the opportunity to get onto the property ladder, and we’re excited to be partnering with Glasgow City Council to offer this service.”
Backers of the program said that all Glasgow Credit Union mortgages have the added benefit of no set up, arrangement or product fees, which means that there is no additional financial outlay required at the start of the mortgage, apart from the usual legal, valuation and survey fees paid to third parties.
Loans will be given up to a maximum property value of £125,000 although the expectation is that the average property value will be around £80,000.
Applicants will be eligible for a 100% mortgage providing they meet Glasgow Credit Union’s affordability lending criteria. Glasgow Credit Union will also provide guidance to buyers with regards to survey costs and legal representation.
First-time buyers will be the primary audience for this scheme, and applicants must purchase the property as their main residence. The pilot aims to attract 50 buyers.