Jump to content
House Price Crash Forum
cashinmattress

Newcastle Council To Offer 95 Per Cent Mortgages

Recommended Posts

Hmmm...

As councils in Britain face £2bn in savings as a result of the spending review, Nick Martin finds one council offering 95 per cent mortgages to help people onto the housing ladder.

Since the 1960s the west end of Newcastle has been defined by its residential tower blocks.

15 storeys high and based on a Swedish model of living, they were a revolution - a departure from the rows of terraces used to house the workers of the nearby shipyards and tank factories on the Tyne.

But by the 1980s the revolutionary model was falling apart and so were the flats.

I've come back to Newcastle and to what used to be called Cruddas Park - or Riverside Dene, as it is now called. I've heard that the council here is once again embarking on a remarkable and controversial scheme.

Newcastle City Council has spent £40m refurbishing these once-tatty flats but was unfortunate enough to begin work before the housing crash. Since then the main housing developer pulled out leaving the council in the lurch with a half finished project.

Newcastle City Council is using public money to provide mortgages of up to 95 per cent to people with low deposits.

The big problem for the local authority now is selling them. But there is another problem. Since the banking crisis there isn't a building society or bank in the land which is willing to lend on them. They are seen as bad for business. A risky loan.

So Newcastle City Council has turned to what it says is the last remaining option: to use public money to provide mortgages of up to 95 per cent to people with low deposits - all in an attempt to get rid of the flats.

"If this is a risk, it's a calculated risk," says Cllr John Faulkner, the LibDem leader of Newcastle City Council.

"We are not entering into this lightly. We have sought the help and advice of a local lender who will carry out all the relevant checks for us, and we are confident that we will be able to sell these flats."

Newcastle City Council, like all local authorities, is facing some very tough decisions. As part of the coalitions £6.25bn of spending cuts, local authorities are expected to find £2bn of that through job losses and service cuts.

Newcastle City Council says this is money it has already borrowed, and needs to make it back to fund other projects. A sign, perhaps, that local authorities are turning to ever more risk options in this tough, austere world.

"It is going to be tough for us as a council, but we are well run and we are well funded so people should not think that this is a reckless thing."

What concerns some is the type of mortgages Newcastle City Council is offering. The 95 per cent mortgage - where borrowers need only find a 5 per cent deposit - have all but vanished from the high street since the banking crisis, and are seen by some as more risky than other products.

Ismail Urtuck, senior professor in banking at Manchester Business School says the council needs to do its checks.

Public money is being used to finance the loans, and the council must ensure people are creditworthy. Professor Ismail Urtuck

"Ideally, the council would be dealing in 75 per cent mortgages. They are safer and they provide more of a cushion if the market suddenly crashes or the borrower defaults.

"What makes this more risky is that it is public money being used to finance the loans and the council must ensure that people are creditworthy."

The foyer of The Willows, one of the completed tower blocks, is impressive. It has the feel of a hotel lobby, with wood panelling and leather sofas. The lifts are new and carry us to the tenth floor, where we are shown of the split-level, duplex apartments.

Brain Dixon, housing manager, tells me that this is a "quality product" which be sought after.

"This area is great to live in. Just down there are all the shops and the university. There are already lots of young professionals living in this area and maybe they will want to buy a flat in this brand new development."

It is a hope and a gamble, as Mr Dixon admits.

A short walk from the neat landscaping of the flats and you enter a whole different world. A 1980s shopping centre with graffiti and peeling pain, dark alleys and concrete underpasses. Is this really where young professionals will want to live?, I ask Cllr Faulkner.

"We have conducted marketing and sales research, and the evidence coming back is that people will want to live here.

"But that research also told us that the biggest problem would be getting building societies and banks to finance the deal. That's why we're doing this. But we're confident people will want to live here."

House prices in Newcastle have risen by more than a third since 2003, according to the Land Registry, and across the country millions of first-time buyers have been priced out by a rising market and a demand for huge deposits.

It sounds like an easy way to get onto the property ladder. Frankie Clarke, graduate, aged 25

In a city centre bar 23 year-old graduate Frankie Clarke says she is desperate to get on the housing ladder.

"The problem is the deposit. Something like £25,000 is just way out of reach for me."

So would she be tempted by the council's 95 per cent mortgage offer?

"It's definitely something that I would give some serious consideration to. It sounds like an easy way to get on the property ladder and would help me get that house I want so bad.

"But the area would put me off. I'm not sure I would like to walk back from work on a dark night."

The council stands to lose millions of pounds if it cannot sell these flats as the reality of this new world takes hold. Councils all over Britain are turning to previously risky ventures in a desperate bid to make ends meet.

07_newcastle3_w.jpg

What do the Geordies on the forum think of their apparently feckless council, after having 'upgraded' and who are now attempting to offload these stinkpits?

I don't know the area in particular, but most of neighbourhoods across the UK that have these cookie cutter tower blocks are inhabited by right dodgy folk.

Edited by cashinmattress

Share this post


Link to post
Share on other sites

Nobody in their right mind would choose to live in Cruddas Park, or the Meadowell Estate in the east , unless they're were brought up there & knew no better, or very desperate to get on the property ladder at all costs.

Share this post


Link to post
Share on other sites

Wow they look like luxury apartments that go for £200K down south!

It sounds like an easy way to get onto the property ladder. Frankie Clarke, graduate, aged 25

...does he not realise it's slippery sugar coating on a ladder that's actually a snake.... :rolleyes:

Share this post


Link to post
Share on other sites

Who do they sell them on to if they are deemed unmortgageable by the banks - cash rich BTLs? :rolleyes:

Share this post


Link to post
Share on other sites

I have posted on our local papers story about this, sheer insanity.

Does anyone know how much they are asking for these flats?

Cruddas Park is grim, I used to work in mental health and have spent a fair bit of time in these blocks.The locals will see the new residents as easy pickings, there is nothing in the area for "young profesionals", it is benefits central.

"Riverside Dene", its not by the river and its not a dene.

I seem to remember Newcastle City Council are also financing a private hotel, thats the Lib Dems for ya!

Share this post


Link to post
Share on other sites

"We are not entering into this lightly. We have sought the help and advice of a local lender who will carry out all the relevant checks for us, and we are confident that we will be able to sell these flats."

I wonder which local lender this is? Could it be the same one that lent 125% mortgages to people who couldn't afford them during the boom and subsequently became the first bank in over 100 years to suffer a bank run and is only standing today because te government had to nationalise it?

Sound like good people to take advice from.

Share this post


Link to post
Share on other sites

Pent Up - Im willing to bet that the councillors all have buy to let properties so rather than sell them cheap and give pople a fighting chance in the housing market they would rather risk taxpayers money and continue to cre over an entire generation to keep this thing going.

DOes anyone know how to do a fredom of information request because I would love to know if they do all have a 'portfolio'.

Share this post


Link to post
Share on other sites

I had friends that lived in those flats in Cruddas Park – I was always pleased to get away back to my safe suburb at the end of the evening.

I was speaking to a friend (a cabinet member on Newcastle City Council) a few weeks ago when he mentioned to me about how they were going to have to lend money to a developer to build a 5 star hotel because the banks simply aren’t lending. I spluttered something to him (whilst trying not to choke on my beer) about the public purse taking the risk. He got a bit flustered and kept repeating that the banks weren’t lending and then started ‘explaining’ to me that’s there’s a risk to everything. I kind of left it there as he’s a good friend and didn’t want to get embroiled in an argument.

I’ve found an article below on the hotel scheme – it gets worse – they’re speculating on land around the hotel as well.

“COUNCIL plans to borrow millions of pounds to lend to a developer have been criticised.

Newcastle City Council bosses say redevelopment of the area behind Central Station, known as the Stephenson Quarter, could stall for a decade if they do not step in with cash.

So they plan to borrow pounds 30m, lending a large slice to developer, Silverlink Holdings, which will build a 251-bed four-star hotel overlooking the River Tyne, to be run by Crowne Plaza. The rest of the money will be used to buy plots of land near the hotel site to kick-start work on buildings that will be sold on at commercial rates. Construction is set to start in March 2011, with phase one due to be completed in the late summer of 2013.

The council's opposition leader Nick Forbes said: "I can't believe the council is thinking of spending millions of pounds of taxpayers' money on property deals at the same time as saying there's no money for affordable homes or for the youth service and when thousands of people are facing losing their jobs. What happened to developers taking the risk? It's disgraceful."

David Slater, executive director of environment and regeneration at Newcastle City Council, said: "This is one of the key development opportunities in the city centre, therefore Newcastle needs to grasp the opportunity to move things forward, working in partnership with developers."

Earlier this week we revealed the council will turn building society to provide mortgages to people struggling to get on the property ladder. It is piloting the scheme at Riverside Dene, where five of the Cruddas Park tower blocks will be demolished because no money is available for a massive refurbishment.”

Share this post


Link to post
Share on other sites

In today's market, if they are more than £30,000 each then they are overpriced seeing as you can get a Tyneside flat in a nicer area that needs some work for £35,000. However I would rather rent in a hovel and save a deposit for somewhere else than pay to have a 25 year mortgage with anyone for one of those.

Share this post


Link to post
Share on other sites

Pent Up - Im willing to bet that the councillors all have buy to let properties so rather than sell them cheap and give pople a fighting chance in the housing market they would rather risk taxpayers money and continue to cre over an entire generation to keep this thing going.

DOes anyone know how to do a fredom of information request because I would love to know if they do all have a 'portfolio'.

LOL

I used to share a flat with one of them and know quite a few of the lib dem councillors (admittedly mostly the younger ones) and they are all renting (with the exception of one who inherited his house).

Share this post


Link to post
Share on other sites

Wow they look like luxury apartments that go for £200K down south!

Down south must have a very low expectation of luxury if it means paying £200K to live next door to (and below and above) the Trotters.

Share this post


Link to post
Share on other sites

Why not just sell the cheap? People can get conventional mortgages and there's little risk of default and a massive loss to the taxpayer.

that's what i thought.

thing is, it's tricky to get mortgages when you are talking about 20 to 30k, some lenders simply won't go this low

having said that, an unsecured personal loan would do the trick, or a few credit cards

Share this post


Link to post
Share on other sites

if this was my council...id refuse to pay my council tax and have my day in court with all the media of the world there...since when were you taxed to lend ti idiots to buy over priced squalor.

Share this post


Link to post
Share on other sites

I have posted on our local papers story about this, sheer insanity.

Does anyone know how much they are asking for these flats?

Cruddas Park is grim, I used to work in mental health and have spent a fair bit of time in these blocks.The locals will see the new residents as easy pickings, there is nothing in the area for "young profesionals", it is benefits central.

"Riverside Dene", its not by the river and its not a dene.

I seem to remember Newcastle City Council are also financing a private hotel, thats the Lib Dems for ya!

I think it's offers over 100k. Trouble is these valuations don't reflect the inevitable double-dip that everyone is expecting in property prices. If these flats were unloaded at an auction, they would be snapped up by BTLs who wouldn't offer more than £45,000 per unit, coz they know these flats will have maintenance charges attached. Also, the security issue means paying for security fencing, cameras and on-site security guards and electronic pass keys for residents and their cars. A development like this can be made to work so long as the additional investment is made to turn it into a "gated" community.

Share this post


Link to post
Share on other sites

Wonder if the council workers will dip into their pensions to fund the shortfall once their little property venture inevitably turns bad.

Thought not.

There was a day when councils built social housing. Now they buy it up, Allsop it, and sell it on to private buyers. Funny old world.

Also wonder how many units they did for £40m. I usually find the 'social enterprise' type outfits spend 2-3 times the amount private builders do. Wouldnt be surprised even if they met their targets its still making a loss for Newcastle taxpayers.

Share this post


Link to post
Share on other sites

The blocks will need remodelling in another 10 years tops... so anyone who buys them will have to fork out for more very expensive repairs.

Concrete blocks like these have a limited lifespan ...

Share this post


Link to post
Share on other sites

you

are

sh*tting

me

100k for what , for the entire block?

I drove past it yesterday and I couldn't keep thinking that I'd rather live in a tent in the woods than in there. Aside from a few pensiones, the area is riddled with chavs on benefits and various illegal immigrants.

I certainly wouldn't walk around there when it's dark.

Who on earth would spend their money on such a shithole when the council will house you in a better place, for free ?

It's absolutely insane.

Share this post


Link to post
Share on other sites

As I said earlier you could get a Tyneside flat down in North Shields for £40,000 ish that needs a little work that would be far nicer and safer than that hell hole. If they want £100,000 then the people in the Newcastle City Council area are about to be well and truly shafted :blink:

Share this post


Link to post
Share on other sites

I think it's offers over 100k.

*clears throat* Ahem Hack ahem....

*deep breath*

HAHAHHAHAHAHAHHAHAHAHAHAHAHAAHAHAHHAAHAHAHAAAAAAAAAAAAAAAAA HAHAHAHAHAHAHAHAHAHAHAHHAHAAHHAAHAAAAAAAAAAAAAAAAA HHAHAHHAHAHAHAHAHAHAHAH AHAHAHA HAHAAHHAHA AHAHAHAHAHHAA HAHAAAAAAAA!!!!!!!!!!!

Edit: Actually it just occured to me, when they say 100k "each", do they mean 100k for "each" "tower block"? Sorry, I still can't process the 100k for "each" "apartment", I read the words and yet it just doesn't seem to register. I wonder if the renovated and ever so friendly sounding "rock" pub next door will be reopening as a wine bar?

Edited by meow

Share this post


Link to post
Share on other sites

So can anyone find out how many units they glorified with £40million of taxpayers money?

Councils seem very good at concealing the (probably obscene) unit cost of these projects.

Heres a £100million one in Northampton (apparently the locals dont even want it, but the council is going to compulsory purchase them and splash the cash anyway, because councils have to justify their existence by doing things, regardless of whether they are necessary or not, wanted or not) AGain, i cant find how many homes they get to splash magnolia paint onto for that £100m.

http://www.northampton.gov.uk/site/scripts/documents_info.php?documentID=808

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.