Oldham Mortgage: A hand up, not a handout

OLDHAM MORTGAGE: (L-R) Alan Kirkham (Alan Kirkham Estate Agents), Jim McMahon (Oldham Council Leader), Richard Powell (Ryder & Dutton) and Tim Haughton (Clarke & Co)
OLDHAM MORTGAGE: (L-R) Alan Kirkham (Alan Kirkham Estate Agents), Jim McMahon (Oldham Council Leader), Richard Powell (Ryder & Dutton) and Tim Haughton (Clarke & Co)

 OUR NEW Oldham Mortgage scheme launched last week – the first modern Local Authority mortgage in Greater Manchester.

Subject to Cabinet approval it will give first-time buyers a real helping hand to get onto the property ladder.

I met with local Estate Agents on Friday morning to explain the scheme and their response was very positive.

The Oldham Mortgage will initially assist around 50 families to realise their dreams of buying a first home – and will have an even wider knock-on effect.

At present there are many people who want to get onto the property ladder but – even though they could afford the mortgage repayments – find themselves unable to save a big enough deposit.

By ‘doing our bit’ here – providing an indemnity in partnership with Lloyds TSB – we can reduce the typical deposit they need from 25 per cent to five per cent.

I see this initiative as a very important part of our Co-operative Council agenda because it’s about giving people a ‘hand up’, not a handout.

By providing active support like this we are enabling residents to do more for themselves and to realise their aspirations.

At the same time we are also helping to stimulate the local economy by giving new impetus to the housing market.

That encapsulates exactly what our Co-operative Council is all about.

Working with partners in the public, private or voluntary sector to empower people like this is key to putting them more actively in control of their own futures.

We have deliberately structured the Oldham Mortgage to make it as flexible as possible.

We’re encouraging buyers to purchase from the open market – which makes it different to many existing schemes across the UK which are linked to buying new build homes.

We also decided not to include ‘right to buy’ properties in the scheme for two reasons.

Firstly, we didn’t feel it was in the wider public interest to support the sale of social housing.

And secondly we believe that to do so would do anything for the local housing market.

By allowing buyers to select homes from those on the open market experts predict it could lead to a knock-on effect of about 250 sales in total because first-time buyers really help to spark the property chain into life.

The scheme is also open to people from other areas who may wish to relocate to the Borough.

We hope this makes it attractive to companies considering relocating to Oldham – and gives us another competitive edge above neighbouring towns.

The conversation I had with the estate agents about the local housing market was very informative.

They explained that things are actually beginning to pick up but that the biggest issue at present seems to be perception.

I heard that many would-be first time buyers out there seem to be sitting on their hands because they believe they simply cannot get a mortgage full stop.

Yet the estate agents believe there is actually far more willingness out there to lend than people generally perceive.

Hopefully the Oldham Mortgage will provide a spark and some much-needed assistance in tackling that ‘confidence’ issue.

There are, of course, other issues that need tackling here in the longer-term – such as the quality of the housing stock and the need to encourage more affordable social housing.

We’re committed to ‘doing our bit’ on both fronts and agreed to keep our dialogue ongoing with the estate agents to ensure we can work co-operatively together for the greater good.

Thanks for listening,


11 thoughts on “Oldham Mortgage: A hand up, not a handout

  1. Interest rates

    Interest rates are at a 300 year low because the B of E is printing money via Quantitative Easing to buy the UK’s own debt. This suppresses our interest rate because if the debt were sold on the open market other buyers would demand a higher yield. This would force interest rates up.

    It’s obvious that QE cannot go on forever or else our currency would completely collapse. Therefore as more of our debt matures around 2016/2017 we will be unable to continue to buy our own debt because we will already hold too much. At this point interest rates are going to rocket up.

    The timing coincides with when 5 year council FTB 20% deposit schemes are going to mature. At that point the FTB will be faced with an extra 20% mortgage and the entire mortgage will be at a much higher mortgage rate.

    Can you see the problem?

    The FTB’s on these council schemes will be hit with a massively increased mortgage payment. They will be forced to sell the house as will lots of other people who stretch themselves to buy any house nw lulled into the false sense of security that record low interest rates offer.

    The result will be that Oldham council, like other councils all over the UK who do these schemes, are going to be hit with massive losses.

    Meanwhile the bankers will be sat their laughing, their bonuses from this lending will already be spent while FTBs lose 5% and councils lose 20%. The bankers will also scoop much higher monthly mortgage payments from all those fools who believed that 0.5 interest rate will last forever.

    These council schemes are a disaster waiting to happen.

    RESPONSE: Only those who meet the strict lending criteria will be given finance as with all mortgage strict lending criteria will be applied.

  2. Disgusted.

    Oh dear. Another helping hand for banks.
    You are a council. Why are you lending money from taxpayers?
    Have you forgetten where your funds come from?

    RESPONSE: The scheme is ultimately intended to be self financing. However the councils role is also about supporting local families and the local economy. We are well aware of the source of the councils income and determined to get value for money for the taxpayer.

  3. Fred Diamond

    This is how much the Halifax say house prices have dropped since 2007 by region

    NORTH -20%
    YORKS. & HUMB. -20%
    NORTH WEST -19%
    E. MIDLANDS -18%
    W. MIDLANDS -17%
    EAST ANGLIA -15%
    SOUTH WEST -15%
    SOUTH EAST -13%
    GR. LONDON -15%
    WALES -19%
    SCOTLAND -17%
    N. IRELAND -47%
    UK -17%

    Oldham council are risking each of those figures minus the 5% FTB deposit on every house they persuade people to buy using this scheme. It’s our council tax at risk as banks have pushed the lending risk onto us.

    It’s simple. These people cannot afford to buy the houses.

    Perhaps Oldham council should allow their constituents to vote on whether they want this scheme? We know why estate agents think it is a good idea but does anyone else?

  4. With 11000 people on the council house waiting list in Oldham I don’t think “helping” 50 people get a mortgage is going to help.

    If the reality is people can get a mortgage then the council does not need to get involved in this scheme at all.

    Affordable housing should be more available, but by that I mean within reach by being able to save a deposit yourself. The big stumbling block here is house prices. When the average wage in Oldham is £22127 and the average house price is £118,494 then that shows that something is clearly wrong.

    Until house prices fall to sensible levels then housing will be unaffordable for ordinary people.

    The council should continue to look at ways of building social housing, and to support fully those tenants with bad landlords.

    I have heard of some excellent work from the private sector rented team at Oldham recently.

    RESPONSE: This is part of a package of housing initiatives being undertaken including the building of 1,200 new homes onsite now in Oldham. It is important that we have a package that supports all families, not just those requiring social housing.

  5. Andy Cap

    Why don’t you make some clear and unequivical comments condeming the rate of cuts that the government is demanding?

    RESPONSE: The current savings have been covered in previous posts and are £24million this year. The blog is supported by the council and therefore can not be used for party political opinion.

  6. You say that the scheme is also “open to people from other areas who may wish to relocate to the Borough.” Given that many young, aspiring first time home owners, born and bred in a particular area/district, ordinarily could never afford to purchase a property there – Saddleworth being a prime example, will there be a quota in place regards how many families from outside the town can take advantage of this support.

    RESPONSE: No quota has been set for those within or those looking to move within the borough however the scheme will only be promoted within the borough by the council itself, although clearly it will receive media attention and will be open to those wishing to move to to the borough.

  7. You say: It is important that we have a package that supports all families, not just those requiring social housing.

    Ah, but why does the council feel obliged to support ‘all families’ rather than just those in most need?
    Anyone who can save for a mortgage deposit doesn’t need support.

    You should have asked first time buyers whether they would have preferred house prices to be lower or help taking on more debt!

    You’ve even said that it is perception stopping people from applying from mortgages. Perhaps the perception is that an average house price being X10 salary is just too much. Helping people borrow more money isn’t going to change this.

    What monitoring will be put in place to ensure that these 50 mortgages are given to the right people?
    If they are such good risks to lend too, then surely the council doesn’t need to get involved at all.

    What plans does the council have for worst case scenarios of these people not being able to pay their mortgages, the council then being in hock for money and then having less money to help the people of Oldham who really need help?

    How much extra social housing could be built if the council didn’t partake in this mortgage scheme?

    Why social housing is a better investment for Oldham.

    1. Social housing is cheaper than expensive private rental. This means families have more money to spend on other things. Every £1 not spent on rent can be spent in the wider economy.

    2. Social housing brings stability to communities. Long term tenancies are more conducive to community spirit.

    3. Social housing benefits those in need. Let those not in need sort themselves out.

    4. New social housing being built brings with it employment just as much as building private sector housing.

  8. G Blessington

    This is a shocking waste of taxpayers money. All you are proposing to do is to transfer risk from the lender (banks) to the council. Of course the estate agents were in favour – they make money out of higher house prices. If you really believe in this scheme, as councillors you should volunteer to be personal guarantors for the risk – if you believe nothing can go wrong, where is the problem?

    Act in the interests of your citizens and campaign for more housebuilding and encouraging lower houseprices, not giving free money to lenders.

    Can we also ask how many councillors have a vested interest in high house prices, either by buy to let portfolios or large mortgages that would slip into negative equity if the ‘value’ of their house went down?

  9. Annie

    I would like to know how many of the new homes being built are additional to the housing stock, and how many are replacing those which have been demolished in the last 5 years.
    What is the profile of the new homes, and is there any provision for shared housing. This will be needed more than ever with the changes to housing benefit to those under 35.

  10. Malinvestment

    This scheme has nothing to do with new homes. It is the council using our council tax to fund deposits for people to buy existing homes for sale on the market. That’s why the estate agents are in favour of it.

    Like liar loans have shown in the past, if some people are willing and able to pay an inflated price for a house it makes prices more unlikely to drop for other buyers.

    People who rent and pay council tax in Oldham are seeing their own taxes be used to help price them out of buying a home.

    The council should not be using our council tax to speculate on property to help estate agents, it should be building more council houses.

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