Bournemouth launches mortgage loan scheme

Bournemouth Borough Council has launched a finance scheme offering mortgages to homebuyers and loans to local businesses.
The council committed to the Community Finance Initiative (CFI) in July 2013 and is already using a £15m pot to lend to small businesses.
Loans to first time buyers who hold a minimum 5% deposit are now available at a rate of 4.2% over a period of 10 to 30 years.
Liz Wilkinson, the council’s executive director for finance, said: “All applications for mortgages will be considered on a case-by-case basis.
“Our research showed that 73% of potential first-time buyers in Bournemouth are struggling to save the necessary deposits required by lenders.
“This is all about making mortgages more accessible to local people.”
Any profits returned from the CFI will be recycled back to the council’s general fund and used to support the costs of front line services and pay down initial capital sums over time.
Wilkinson said that the council’s initial investment should be repaid by year 10 of the scheme subject to take up.
She told Room151: “The scheme helps local people but also gives us a much better interest rate than we would get from many investments currently on offer.”
The CFI is a company limited by shares, wholly owned by the council.
Wilkinson said that the council’s CFI is currently limited by the 1985 Housing Act, which requires that the product has to have a variable interest rate, in accordance with the rules for setting such rates as determined by the secretary of state.
She said that the council is currently seeking accreditation to gain a full banking license with from the Financial Conduct Authority and Prudential Regulation Authority.
She said that this would allow the council greater freedom to offer a wider product range and begin to offer savings products to residents.
Leader of the council John Beesley, said: “The CFI aims to provide alternative finance to individuals and businesses in Bournemouth to help create and retain wealth in the town for the overall benefit of the community.”
He added that the council’s mortgage scheme offers a higher loan-to-value ratio than the government’s Help to Buy scheme.