COLCHESTER Council has agreed to spend £2m on a scheme to help people get onto the housing ladder.

Under the Local Authority Mortgage Scheme, Colchester Council has agreed to team up with Essex County Council, which will put up £1million.

The buyers, who will have to meet strict criteria, will have to raise a five per cent deposit themselves.

Colchester Council will then put up ten more per cent of the deposit required, as will Essex County Council, which means the buyer will have a 25 per cent deposit.

The money will be held in a bank account and the cost of the council ‘loan’ will be added to the borrower’s repayments.

After five years, as long as the buyer has not defaulted on the mortgage, the councils' 'loan' be returned. 

Colchester Council is using funds for the scheme it said would otherwise be sitting in its reserves.

If an average property price of £150,000 is assumed, the scheme would help 66 buyers.

“This is a chance for the council to help people who can afford to pay a mortgage but are suffering in the same way so many people are in raising a 20 or 25 per cent mortgage,” said Paul Smith, borough councillor responsible for business.

“This administration has always had housing as a key area which we would like to help in.

“We have been successful in the social housing sector but the sector we have not been able to help so far is the first time buyers and this scheme will help people get into the housing market.”

The scheme only covers Colchester borough postcodes and will only be available through Lloyds TSB, was agreed at a meeting of Colchester Council on Wednesday.