Bank helps make mortgage a little less taxing

BANK of Scotland today launches a mortgage deal offering home-buyers half the cost of their annual council tax bill.

The bank will pay 50 per cent of the borrower's first annual bill, up to a maximum of 750, in an arrangement that will be available until 7 May.

The offer will be made available on most home-mover or first-time buyer mortgages arranged through Bank of Scotland branches, online or by phone, but remortgagers will not benefit. The bank will pay the relevant council tax directly to the borrower's local authority.

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Council tax bills in Scotland have increased by an average of 67.5 per cent since 1997, reaching 987 in the financial year ending next week. That compares with a 39 per cent rise in the retail prices index measure of inflation over the same period. Jaedon Green, head of direct mortgage acquisition at Bank of Scotland, said: "As we move into what is traditionally one of the busiest times of the year in terms of property moves in Scotland, we are doing our best to help both homemovers and first-time buyers.

"Council tax is one the largest monthly outgoings from a household budget and our offer is specifically designed to ease the financial burden at such a critical time."

The lender launched a similar deal last spring, up to a maximum of 1,000. But the benefit to first-time buyers in Scotland will be limited, with most moving into small properties with low council tax bands.

First-time buyers are instead likely to secure the greatest savings by shopping around for the best rate available. Lenders expect more deals to be made available for buyers with small deposits over the next three months, according to the latest Bank of England credit conditions survey.

The number of 90 per cent loan-to-value deals has crept up in recent months, although the average rate remains significantly higher for borrowers without substantial deposits.

The credit conditions report said: "A net balance of lenders reported that maximum loan- to-value ratios had increased for a second consecutive quarter. Lenders expected a further small increase in maximum loan-to-value ratios in the second quarter of 2010."