Chris Leslie, Director of NLGN, said: "Councils used to be in the mortgage business until the 1980s when this facility was wound down by the Government, as it was then assumed that the private banks could cope. We now know that a diversity of mortgage provision is needed to prevent the current crisis.
"Many people are suffering because of the turbulence of the housing market and through no fault of their own are unable to get mortgage or remortgage finance from the banks.
"The private banking sector’s mistrust of one another means that it should fall to the public sector to ease liquidity and offer mortgage finance to the public. With the capital markets more willing to trust local authorities than the private banks, councils could prudently pass on cheaper mortgage capital to some of their residents.
"Councils know their patch, are familiar with the calibre of property in their area and have every incentive to see householders prosper. The council tax payer can be protected because any mortgage loans are secured against the asset of the property in question, and may indeed make a healthy surplus for the community over time if housing normalises over the coming decades.
"While we still believe that councils should have complete freedom to judge for themselves the rate at which to offer mortgage loans to their residents, we welcome the encouragement from the Government.”
Have your say on this using the comment section below