The interest rate on local authority housing loans is determined by the Housing Finance Agency by reference to mortgage rates prevailing in the financial market. The current variable rate is 4.25%. The current fixed interest rate available on local authority loans is 6.75% for a period of five years.
The Government's recently published review of the Action Programme for the Millennium contains a commitment to target support to home owners with high fixed interest rate local authority loans. This commitment relates to higher fixed interest rates on loans, advanced in the 1970s up to the mid 1980s, which reflected the cost of long-term funds available at that time. Borrowers with local authority fixed rate mortgages are free, since 1980, to redeem such loans without any interest rate penalty and refinance in the private sector. My Department is currently examining options with a view to putting in place measures to implement the Government's commitment as soon as possible.