A local government thinktank has suggested that councils will make good mortgage providers, following a move from the government to encourage them to lend.
Local councils have a "good sense" of what makes for wise, and what makes for foolish mortgage decisions, according to a thinktank.
A number of local authorities in areas including Hackney, Bristol and Manchester are looking into the possibility of becoming mortgage providers, following a decision by the government. The Communities and Local Government department has cut the rate at which councils can lend from 5.07 to 3.93 percent.
James Hulme, head of communications at the New Local Government Network, said that because the property market is suffering, the possibility of the authorities stepping in should be considered. The sector has been hit by a barrage of problems, including the credit crunch, which has caused house prices to fall rapidly and mortgage lending to be reduced.
"Local authorities have a history of providing mortgages and were often the main provider of mortgages in the 60s and 70s and up until the 1980s," he said. "We would argue that local councils have a good sense of what are good and bad investments in terms of mortgages. They know their local area, they know which areas are likely to be a good investment or not."
However, Mr Hulme added that in "normal circumstances" the market should still be in control of mortgages.
