Councils want to offer mortgages

Council chiefs are pressing to be given the power to offer competitive mortgages to first-time buyers and those at risk of repossession. In a letter to the Times, they propose borrowing £2bn from the public works loans board to fund the move, which they hope will rescue the housing market.

Councils are already allowed to offer mortgages, but since the 1980s they have been forced to offer an uncompetitive rate which has led to banks and building societies snapping up the lion’s share of home loans business. Critics of the plans say loans would most likely be offered to those prone to default, leading to higher council taxes, but the Council of Mortgage Lenders welcomed the proposals, adding that councils would have to be regulated by the Financial Services Authority.