The mortgages could be offered from as early as October, with many industry figures suggesting the scheme could pave the way for other Local Authorities to offer similar deals.
Under the proposals, borrowers would need a minimum 10% deposit to be considered for a mortgage limited to three times household income, with loans capped at £200,000.
The scheme was made possible after the Government changed the rules requiring Local Authorities to charge a minimum interest rate of 6%.
Paul Watson, leader of Sunderland City Council, said the current downturn and well-publicised lack of mortgage finance had created problems for people who wanted to get on the housing ladder and become home owners.
He added: “The re-introduction of Sunderland City Council mortgages could help create more confidence with house builders and prospective home-owners and so create movement in the city’s housing market and support the local economy.”
Ray Boulger, senior technical manager at John Charcol, said other Local Authorities would be looking at offering a similar scheme after assessing the framework of Sunderland City Council’s proposition.
He explained: “Because Local Authorities are not subject to the same capital adequacy rules as lenders they would have the ability to lend at higher LTVs. It is a good move.”
