A Community Finance Company will offer business loans and mortgages to local people, if plans are approved by Cabinet next week (Wednesday 24th July).
The yet-to-be-named company would be wholly owned by Bournemouth Council.
If agreed, a pilot will commence later this year, with business loans offered from November, and the first mortgage set to be approved in January 2014. The pilot will run until March 2015.
£15million from the Council’s unallocated capital reserves has been committed to enable the operation of the Community Finance Company. It is likely to finance up to 75 entry-level mortgages and around 200 small business loans, although these figures are indicative and as such not targets or fixed.
The pilot business loan facility will commence in November 2013. Up to 200 business loans are expected to be made available, at a value up to £10,000 each, and offered at a rate of around 16 per month.
Commencing in January 2014, the mortgage pilot would finance around 50-75 entry-level mortgages, approved at a rate of around four per month. These are likely to be in the order of £100-£150,000 each, and will be offered to local people with a proven ability to repay.
During the pilot phase, mortgages would be variable, at a rate determined by Government, in accordance with the Housing Act 1985. Lower capital deposits than many existing commercial mortgages are likely to be required, making these loans more accessible.
Cllr John Beesley, Leader of the Council, said, “This highly innovative initiative directly supports the Council’s regeneration and housing agendas. Specifically, we expect mortgage activity to prioritise lending that will support our Backing Boscombe and Town Centre regeneration commitments. This is because we believe that having a settled resident population with firm roots in an area has many benefits, including increased civic pride & engagement, reduced anti-social behaviour, and a better skilled & available workforce.” He continued, “We know that many people have a proven track record of meeting regular rental payments, but are currently struggling to access mortgages.
This is largely because high rents are making it difficult for first time buyers to save a sufficient deposit to be able to secure an affordable commercial borrowing rate, making repayments beyond reach. This is all about making mortgages accessible to local people.”
Cllr Beesley continued, “In terms of businesses, Bournemouth has a growing and highly skilled creative industries sector, and, whilst not exclusively, we will particularly be looking to support growth in these companies through our loans scheme.”
Liz Wilkinson, Executive Director for Finance is leading the project. She said, “I am delighted to be involved in what is an extremely exciting initiative for the town. The community finance company will present real opportunities and we are working hard to make that happen, reporting back to Cabinet in autumn on our progress.”
Setting up as a company means the operation can be run commercially and so generate trading surpluses that can be returned to the Council to offset reduced Government grants, mitigating the effect on frontline services, and/or providing further invest in commercial activities for the benefit of the borough and its residents.
The Community Finance Company is required to apply for and secure a banking licence, which will, in time, allow it to provide bank accounts, offering further capacity to lend locally and so continue to support the town’s economic prosperity and regeneration. This will also allow mortgages to be offered on fixed rates determined by the Company.
The yet-to-be-named company would be wholly owned by Bournemouth Council.
If agreed, a pilot will commence later this year, with business loans offered from November, and the first mortgage set to be approved in January 2014. The pilot will run until March 2015.
£15million from the Council’s unallocated capital reserves has been committed to enable the operation of the Community Finance Company. It is likely to finance up to 75 entry-level mortgages and around 200 small business loans, although these figures are indicative and as such not targets or fixed.
The pilot business loan facility will commence in November 2013. Up to 200 business loans are expected to be made available, at a value up to £10,000 each, and offered at a rate of around 16 per month.
Commencing in January 2014, the mortgage pilot would finance around 50-75 entry-level mortgages, approved at a rate of around four per month. These are likely to be in the order of £100-£150,000 each, and will be offered to local people with a proven ability to repay.
During the pilot phase, mortgages would be variable, at a rate determined by Government, in accordance with the Housing Act 1985. Lower capital deposits than many existing commercial mortgages are likely to be required, making these loans more accessible.
Cllr John Beesley, Leader of the Council, said, “This highly innovative initiative directly supports the Council’s regeneration and housing agendas. Specifically, we expect mortgage activity to prioritise lending that will support our Backing Boscombe and Town Centre regeneration commitments. This is because we believe that having a settled resident population with firm roots in an area has many benefits, including increased civic pride & engagement, reduced anti-social behaviour, and a better skilled & available workforce.” He continued, “We know that many people have a proven track record of meeting regular rental payments, but are currently struggling to access mortgages.
This is largely because high rents are making it difficult for first time buyers to save a sufficient deposit to be able to secure an affordable commercial borrowing rate, making repayments beyond reach. This is all about making mortgages accessible to local people.”
Cllr Beesley continued, “In terms of businesses, Bournemouth has a growing and highly skilled creative industries sector, and, whilst not exclusively, we will particularly be looking to support growth in these companies through our loans scheme.”
Liz Wilkinson, Executive Director for Finance is leading the project. She said, “I am delighted to be involved in what is an extremely exciting initiative for the town. The community finance company will present real opportunities and we are working hard to make that happen, reporting back to Cabinet in autumn on our progress.”
Setting up as a company means the operation can be run commercially and so generate trading surpluses that can be returned to the Council to offset reduced Government grants, mitigating the effect on frontline services, and/or providing further invest in commercial activities for the benefit of the borough and its residents.
The Community Finance Company is required to apply for and secure a banking licence, which will, in time, allow it to provide bank accounts, offering further capacity to lend locally and so continue to support the town’s economic prosperity and regeneration. This will also allow mortgages to be offered on fixed rates determined by the Company.
