asked the Minister for Finance if he will state why the cost of redeeming loans from local loans or land law loans funds has been substantially increased since the 13th June, 1946; and whether, in view of the hardship imposed on persons anxious to redeem existing loans, he will consider reverting to the rate of redemption in operation prior to the 13th June, 1946.
Ceisteanna—Questions. Oral Answers. - Local Loans Redemption.
The terms on which local loans, including land loans, may be redeemed are prescribed in the Local Loans Fund Regulations, 1937, which provide that, where the rate of interest at which a loan was issued exceeds the rate current at the date of redemption, the sum payable is the present value of the outstanding payments calculated at the current interest rate. The effect is to require the borrower to pay, in addition to the capital outstanding, a premium, the charging of which is necessary to ensure, in accordance with Section 13 (2) of the Local Loans Fund Act, 1935, that redemption does not occasion any loss to the fund.
The present value of a number of periodical payments increases according as the rate of interest applicable is reduced and, consequently, the cost of redeeming local loans has increased since June, 1946, when a reduction from 4¼ per cent. to 2½ per cent. was made in the rate of interest on new issues out of the Fund. I do not propose to make any change in the present arrangements.