Despite the previous Labour / Liberal Democrat administration claiming earlier this year they had been forced to make more than £750,000 in cuts to freeze the Council Tax, the local authority now says it has enough money to fund its £5.5m mortgage scheme.

Among the cuts introduced in February were changes to bus services, including the impending withdrawal of the No. 51 Dundee to Liff route.

But the council says it does not believe its policy, agreed by the policy and resources committee last week, represents much of a risk for Council Tax payers.

Under the scheme, council tenants will be able to apply for 100% mortgages over a 25-year period on the net price of their house once the right-to-buy discount has been deducted.

There will also be 100% mortgages available for private buyers who want to purchase the last property in a block of three or more council houses which have been withdrawn from the letting pool and marketed for sale on the open market.

These mortgages will be calculated on the full purchase price.

The council’s head of finance, David Dorward, will assess the “income verification evidence” submitted to the council by applicants.

The maximum mortgage will be assessed based on three times the applicant’s annual income plus the spouse’s annual income where applicable. The variable interest rate will start at 3.93%.

A council spokesman, confirming the mortgages will be funded from cash balances arising from the difference between income and expenditure, said the scheme would be undertaken by existing staff in the housing, legal and finance departments with no new staff employed.

“Mortgages will be approved subject to meeting the earnings criteria along with further independent credit checks being carried out,” he said.

“The outcome of this will be assessed by qualified staff who are already trained in assessing financial risks.

“This initiative is being introduced to stimulate the local housing economy in Dundee which the current availability of mortgages has not yet achieved.

“100% mortgages will only be available up to the district valuer’s valuation of the property for sale.”

The council is confident that it is covered financially should there be any problem with new homeowners failing to make their mortgage payments.

Once the right-to-buy discount has been deducted, it is understood a mortgage on an average £30,000 house for a council tenant is likely to be about the same or slightly less than the average council rent in Dundee.

In some cases, the maximum discount can amount to 70% off the house valuation. There will be no discount where a private buyer is buying the last property in a block of three or more council houses.

The council is budgeting for 50 council tenant mortgages over the coming year at a total cost of £1.5 million and another 50 private sector loans totalling £4 million.

The spokesman added, “The council will take a standard security over the property and if the borrower fails to pay outstanding mortgage payments, the security will be called up and the property will then be resold on the open market. This should ensure there is no overall loss of capital to the council.

“The Housing Department’s Prevention Team will work with tenants to try and help them remain in their home and offer welfare advice.”