asked the Minister for Economic Planning and Development the role, if any, the Government played in the further reduction of building society interest rates announced recently; if he considers interest rates on housing loans an important factor in economic and social planning; and if he will make a statement on the matter.
Ceisteanna—Questions. Oral Answers. - Housing Loan Interest Rates.
8.
On 28th October last the Department of the Environment invited the Irish Building Societies Association to meet officials of that Department and of the Department of Finance to discuss building society interest rates. At the meeting, held on 15th November, the association informed the officials of its decision to reduce the rates charged on existing and new loans to the levels subsequently announced.
There can be no doubt about the importance of interest rates on housing loans in the context of social and economic planning. The availability of loans at reasonable rates is significant for the stability of the construction industry and, as a consequence, for the economy at large. The level of interest rates is equally important for those who are buying or who wish to buy their own houses. It will be one of the Government's primary concerns to ensure that the interests of house purchasers, of the building industry and of the saving public will be reconciled in the best possible way.
In view of the Government's interest in building society interest rates and in view of the reduction in interest rates by the ACC on already fixed interest rate loans, would the Government consider reducing the 12½ per cent, 11½ per cent and 10½ per cent interest rates pertaining on 48,500 loans to people who are less well off? Can we expect urgent action in this matter?
The trend of interest rates is reviewed regularly by the Government but the specific question might be more appropriately addressed either to the Minister for Finance in the context of Exchequer interest rates generally or to the Minister for the Environment.
The Minister said in his reply that the level of interest rates is very important to the output of housing. Surely the Minister will accept that, with current SDA loans at 12½ per cent, there is no incentive for less well-off people to purchase their own homes?
We cannot continue arguing. Questions must be brief. I will not tolerate this type of argument and that applies to all Deputies.
In view of the stated importance of these interest rates will the Government do for SDA purchasers what they did for the Agricultural Credit Corporation loans?
I have already indicated that the trend in interest rates and the level of interest rates are regularly reviewed.
If a person has an SDA loan of £7,000 over 30 years what would the difference in repayments be for that person if the level of interest was reduced?
I do not have the figures for that.
I can answer the Minister. It would be £190 per year or £4 per week.
9.
asked the Minister for Economic Planning and Development the controls he envisages for interest rates on housing loans in his plans for economic and social progress; and if a fixed relationship will be maintained between the interest rates on building society and SDA loans.
There are several factors which influence movements in the level of interest rates on the various types of housing loans. In the event of these movements leading to an unsatisfactory situation, it would of course be appropriate for the Government to consider suitable action.
Since the factors that govern the interest rates charged on building society and SDA loans are very different and do not necessarily change simultaneously, it is unlikely that a given relationship between the two rates could be maintained.
Is the Minister aware that for the first time in many years the SDA interest rate is 3 per cent higher than the building society rate and that until recently it was 1½ per cent lower? Therefore, a gap of 4½ per cent has been filled in favour of building society borrowers.
I am aware that the interest rates of the two groups have moved in the direction suggested. That makes my point, which I spelled out in my reply, that the factors which influence the trends in the two sets of interest rates are different. SDA borrowers did have the benefit of lower stable rates of interest during the period of very high interest rates which we experienced in recent years. Surely you can equally plausibly construct a case which says that the person who had to pay the very high building society rate in recent years is the first person in need of some reduction.
In view of the importance of interest rates on housing loans, is the Minister not prepared to use the precedent created by the Agricultural Credit Corporation and the precedent of Donaghmede in the Tánaiste's constituency and reduce the fixed loan interest rate to the building society interest rate immediately?
Donaghmede is not in the Tánaiste's constituency.
It was.
I have called Deputy Quinn.
I did not get an answer to my question.
That is not my fault.
Deputy Mitchell is again raising a question that was answered a few weeks ago.
I am raising a question that was asked last week. Forty-eight thousand people are affected by these high interest rates.
I have called Deputy Quinn.
Will the Deputy make the same case for increasing the rate for SDA borrowers if building society rates are increased again?
The Deputy has no right to ask a question before he is called.
Does the Minister agree that the purpose of SDA loans is to enable those with low incomes who are unable to obtain building society loans to obtain loans in order to purchase their houses? As the Government have the power to reduce the fixed interest rate on such loans they are at present making total nonsense of the policy of the Small Dwellings Act if they refuse to reduce the level of interest rates below the current building society rates.
That is an argumentative statement.
I have already made it clear that the factors governing SDA interest rates are based on different factors to those governing building society rates. Of course we want to encourage people to buy their homes, especially those in the low income groups, and that is one of the reasons why one of our steps, which was a quick practical step, was to introduce the £1,000 house grant.
The grant is nonsense without a loan.
The grant reduces the size of the loan.
Reduce the interest rates.
Deputies cannot continue asking questions before they are called. We must have some order. We have answered only nine questions in three-quarters of an hour.
(Cavan-Monaghan): This is the first time we have had a Minister for Economic Planning and Development in the House and perhaps we are a bit new fangled with him.
I should also point out to Deputy Fitzpatrick that it is the Minister's first time and there is an unwritten code that we should show the utmost courtesy to him.
Now that we have successfully broken that rule, fire ahead.
This is Dáil Éireann, not Trinity College.
Will the Minister state how much cheaper the SDA loans are now than at this time last year?
If the Deputy puts down a question I will answer it.
10.
asked the Minister for Economic Planning and Development if the plans of his Department will make provision for increased house-building; and if SDA loans will be available to purchase such houses at interest rates below those of building societies.
The Government have not yet decided on the targets for annual housing completions which will be incorporated in their medium-term plans.
SDA loans are made available at rates of interest which are based on the rates at which the Exchequer can borrow long-term domestic fixed interest funds and the rate of interest attaching to these loans is fixed for the life of the loan. The interest rate at which building societies advance loans is determined by movements in short-term interest rates and the interest rate on these loans is variable throughout the life of the loan. It is not possible, therefore, to make advance comparisons between the cost of these different types of loans.
Does the Minister agree that the interest rates both here and abroad during the past few years are historically high and that something should be done in the interests of justice to reduce the present high interest rates?
I agree that the interest rates in recent years have been historically high. I have already indicated that the trend of interest rates is regularly reviewed. I do not want to say anything further at present.
Can the Minister say whether future SDA loans will take account of the prevailing interest rates, and does the Minister accept that it would be ludicrous for future loans to be at a higher rate than building society rates?
I regard that question as premature. In the last sentence of my reply I said it was not possible to make advance comparisons between the cost of different types of loans. The Deputy is going on to ask what we ought to do in future and I regard that as premature. If the Deputy waits until we prepare some economic and social plans, I will debate those questions with him then.