Mortgage scheme launched for self-build housing on council land
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Local authorities could stand to make a profit from a new mortgage scheme to encourage self- and custom-built housing.
Council treasury adviser Capita Asset Services this week announced that it had signed up Lloyds Banking Group to provide lending under the scheme, which will generate housing on land owned by councils.
It will see councils fund the upfront costs of development for the schemes, but crucially they will receive payment for the value of the homes – often higher than the build costs.
Cecilie Booth, director at Capita Asset Services, told Room 151: “Councils probably won’t be doing this solely in order to make a profit but there is the potential for there there to be a surplus.
“This scheme is not about self-builders making a profit – if they want to do that then they need to find their own land and fund it themselves. This is about councils making it easier for people to build their own homes.”
The “Custom Self Build” scheme is designed to remove financial barriers to self-builders, who often struggle with the upfront costs of development.
Designed to de-risk the process of obtaining mortgages for self-built and custom-built properties, it allows local authorities with land to develop to both attract buyers and retain control over developments until completed.
The scheme will see applicants applying for a mortgage at the start of the process, based on an off-plan valuation.
They will then pay a 5% deposit to the council, which will then fund building costs. When the property is built, the mortgage company will pay the council the other 95% of the initial valuation, and receive future repayments from the occupant.
Councils will also provide a five year indemnity on 20% of the mortgage value, Booth said.
Capita is already in discussions about the product with the 11 “vanguard” authorities which were granted a share of £550m in September under the government’s Right to Build scheme aimed at promoting self build.
The government’s 2011 housing strategy pledged to enable the building of 100,000 self- and custom-built homes over a decade.
Photo (cropped) by Quy Chua
