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Social landlord bypasses banks to provide 100% mortgages

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By Neil Merrick

29 June 2009

A housing association is to bypass high-street lenders by offering its own mortgages at a new housing development in Milton Keynes.

Places for People, one of England’s largest registered social landlords, has become so disillusioned with banks’ lending policies that it is set to provide mortgages to first-time buyers – in some cases at 100% of the selling price.

Associations have blamed the intransigence of lenders for their failure to sell homes through shared ownership schemes. More than 8,700 low-cost homes were unsold in March even though RSLs have begun converting many to social renting.

In what is understood to be a first for RSLs, Places for People mortgages will initially be available only at Wolverton Park, an old railway town near Milton Keynes, where most of the 300 homes have yet to be sold.

Households will be able to purchase their home outright, or buy part of the property and rent the remainder. The RSL is also providing interest-free equity loans worth up to 30% of the home and offering to buy the property back should households fall into negative equity during the first three years.

A PfP spokesman said it would build on its experience of offering loans with the Co-Operative Bank for ‘Ownhome’, another scheme for first-time buyers. Households requesting 100% mortgages would be assessed thoroughly for their ability to pay.

‘We will look at this in a financially responsible manner,’ he added.

PfP’s announcement came in the same week as the Council of Mortgage Lenders revised its market analysis and predicted that 65,000 homes would be repossessed during 2009, 10,000 fewer than it expected at the start of the year.

Housing minister John Healey seized on the forecast as good news and pledged a further £750,000 for free legal advice in courts – twice as much as initially granted by the government. ‘In four out of five cases, the court desk advisers stop immediate repossession or eviction,’ he said.

But Sam Younger, chief executive of Shelter, warned against complacency. He pointed out that figures from the Financial Services Authority figures show repossessions have risen by 62% in the past 12 months, and arrears by 33%. ‘We believe a second, more devastating wave of repossessions could occur within the next two years,’ he said.