§ Mr. Durantasked the Secretary of State for the Environment whether the circular on the new mortgage guarantee powers for local authorities referred to in his hon. Friend's answer in 11 February has yet been issued.
§ Mr. StanleyThe model agreements by which local authorities can guarantee building societies against mortgage default are set out in DOE circular 5/81, which is published today.
Section 111 of the Housing Act 1980 gives local councils and the Housing Corporation a new power to enter into agreements to guarantee building societies against losses arising from a mortgagor's default. Use of the guarantees will complement the existing work of local authorities and building societies in financing house purchase at the lower end of the market, by enabling building societies to increase their lending to those with modest incomes. There will be no charge to public expenditure except where guarantees are called on. Local authorities will have a wide choice of circumstances in which to offer guarantees, including mortgages for the purchase of newly built starter homes, houses in need of improvement in both the public and private sectors, and houses sold under the right to buy, improvement for sale, home-steading and shared ownership schemes.
The model forms of guarantee are acceptable to representatives of the Building Societies Association and the local authority associations. Their publication is an important step forward in the Government's drive to assist low-cost home ownership.