FIRST-time buyers are to benefit from a £1 million fund to be created by the Isle of Wight Council.
The authority announced today (Tuesday) that it was establishing a fund to help boost the local housing economy by helping first-time buyers to raise a deposit.
It is similar to schemes operated elsewhere in the country, a spokesman said.
"It is proposed that a £1 million returnable surety would be lodged with a major high street bank or building society, which would then administer the scheme on the council’s behalf.
"The initiative is aimed at those households who are able to afford monthly mortgage payments on a property to meet their needs, but are currently unable to raise the level of deposit required to secure a mortgage in the first place. It would also help them secure lower interest rates.
"It is hoped that as well as offering vital help to potential homeowners, the scheme would also send positive ripples throughout the wider economy and in the housing market – releasing rented stock for those families in need of somewhere to live," said the spokesman.
The spokesman added: "The initiative is part of a proposed £2.23 million capital investment in housing which will be considered by council on March 27.
"It will also be complemented later this month by a cabinet member paper setting out additional measures to be included in a new housing strategy, such as how social housing stock can be used more effectively to support those in greatest need."
Cllr Stuart Hutchinson, cabinet member for adult social care and housing said: "A major obstacle preventing Island people buying their first home is that they can often struggle to raise the size of deposit required by lenders before they will agree a mortgage.
"This new scheme will help first-time buyers overcome the hurdle of needing to save a very large deposit to put down on a property.
"With support from the First Time Buyer Fund, the deposit they will need to raise could be as low as five per cent – rather than a prohibitively higher figure which might otherwise be required.
"A further advantage with this initiative is that it will be easier for them to afford the mortgage payments.
"This is because they will benefit from a lower interest rate than would normally be available to customers with a small deposit."
The council estimated around 40 first-time buyers could benefit and is working with Sector Treasury Services (regulated by the
Financial Services Authority) to identify the bank or building society
most suited to run the scheme.
Cllr Hutchinson added: "This fund will not only help potential homeowners — and consequently those seeking freed up private rented accommodation – but also the local economy.
"A stimulated housing market is good news for those looking to buy and sell, those involved in the home-buying and home-selling businesses and also those suppliers, trades and stores connected with home improvement. It is estimated that introducing one additional first-time buyer to the market typically frees up to five house sales in a chain."
Work to finalise details of the scheme is continuing and a report will be brought to cabinet on March 12.
The council said applicants must demonstrate they could make the monthly repayments as stringently as they would with any mortgage application.
The council would be paid interest on its £1 million investment and this sum would be returned to the local authority – less any money that has been used through acting as guarantee to any mortgage defaulters – at the end of five years.