asked the Minister for Finance if the Government have any proposal to reduce interest rates on SDA loans.
Ceisteanna—Questions. Oral Answers. - SDA Loans.
32.
The Exchequer lending rate, on which the rate of interest charged on local authority house loans is based, is a long-term fixed interest rate and should consequently reflect the rate being paid by the Government on long-term securities. The present rate of interest on long-term Government securities is just over 12 per cent and consequently there is, as yet, no economic reason for reducing the Exchequer lending rate of 12 per cent. I am, however, keeping the matter under review and should long-term rates continue to fall a reduction in the Exchequer lending rate will be considered.
Is it not normal practice that SDA loans run at a lower level than building society loans? SDA loans were intended for people who are not in a position to get loans from building societies but now they are being penalised because they are paying higher interest rates. The situation is intolerable. Further, the Minister should be aware that people are holding back because they think, with a certain amount of justification, that these rates will be dropping shortly. The long-term prospects do not seem too bright. Interest rates generally are dropping quite rapidly and it surprises me that something similar is not happening with SDA loans, particularly in view of the fact that such loans are generally intended for a certain section of the community.
Does the Minister intend in the future to reduce the 12½ per cent interest rate on SDA loans, in view of the continuing reduction in interest rates elsewhere? Some people were caught last year by this high interest rate.
As I have indicated, this rate is governed not by the short-term interest rates to which Deputy O'Brien has referred but the rate of interest on long-term Government securities, which at present is just over 12 per cent. It is quite possible that that interest rate will drop. If it does then certainly the whole question of a reduction in the Exchequer lending rate will be considered. It is not possible to disregard the level at which the Government can borrow money for the long-term when fixing this rate. Deputy Mitchell will, I am sure, also be aware that one of the advantages of an SDA loan is that it is at a fixed rate of interest which also affects the Exchequer. With regard to the Deputy's query I cannot undertake that persons who have already received SDA loans will get a reduction in the interest rate, which I think is what he has in mind.
Can I remind the Minister that there is a precedent for this which affects an area in his constituency?
The Deputy may ask the Minister a question.
Will the Minister not look at that precedent and give some hope to people outside his constituency?
I am well aware of that precedent, as I am sure the Deputy knows, since I had a good deal to do with it. The Deputy will also be aware that there were exceptional circumstances in those cases in which people who qualified, and in some cases had been approved, for SDA loans were in fact obliged to take loans from building societies and other similar institutions. I think that is a different situation from those who were approved for SDA loans and got them.
When was the 12½ per cent interest rate fixed for Government Exchequer loans and when will it be subjected to review? Has the Minister any dates?
It became 12 per cent in January, 1976. As regards the date on which one could hope for a reduction I cannot give a date for that because, as I have said, I have to see what happens to the cost of long-term borrowing by the Exchequer.
Would the Government consider guaranteeing loans to the building societies to enable the SDA loan borrowers to avail of the lower interest rate as they did when the rates went up?
A moment ago we adverted to difficulties which arose precisely because in the case of SDA loans the interest rate is fixed whereas in the case of building societies it fluctuates. I would be very slow to contemplate getting into a situation where what happened the last time could happen again.
May I ask the Minister——
I have allowed enough supplementaries on this question.
This is the final one. I am sure the Minister will appreciate that many SDA loans are prohibited as far as incomes in rural Ireland are concerned. Would the Minister consider introducing a scheme of shared ownership where the State would own half of the house and the tenant could buy the other half? This would make it more attractive for people to build their own houses.
That is a separate question.
It is a very important supplementary and should be considered in relation to SDA loans which have now become prohibitive because of the inflation rate.
It is a separate question.