MORTGAGES and business loans will soon be available from Bournemouth council as it plans to venture into the financial sector.

Proposals to set up a Community Finance Company, which has been dubbed the “Bank of Bournemouth,” were unanimously approved by cabinet members.

The council intends to start with a fund of £15million, which will finance around 75 mortgages to first-time buyers and loans to around 200 small businesses.

The pilot business loan facility will commence this November, with loans of up to £10,000 available to fledgling businesses, Mortgages will start to be offered from next January, with up to £150,000 being offered to local people with a proven ability to pay.

Council leader Cllr John Beesley said: “We're very conscious that this is public money. We're very aware that we need to make sure that we have minimised the risk as far as any lender possible can and that we have a business case that is funded on reality rather than hope and expectation.“

However, he stressed the scheme made good financial sense and should generate far better long-term returns than if the council's savings were left in the bank.

“We're not doing this in a philanthropic way, we're opening the door to these fledgling businesses and first-time buyers who are not going to be helped by our banks, building societies and financial institutions,” he said.

Cllr Allister Russell questioned whether the scheme could artificially inflate the property market: “This could set off housing inflation again like we had in the 1990's. Money is so cheap and this is what we must watch,” he said.

But Cllr Beesley said their scheme would not be big enough to upset the market and pointed out they would be helping first-time buyers, which is the least expensive part of the market.