Vol. 317 No. 5
asked the Minister for the Environment if he will authorise building societies to increase and extend their phased payments for new house loan applicants in view of the continuing shortage of bridging finance; and if he will make a statement on the matter.
9.
asked the Minister for the Environment if he will empower building societies to make direct payments to loan applicants for secondhand houses who cannot close sales due to lack of bridging finance.
I propose, with the permission of the Ceann Comhairle, to answer Questions Nos. 8 and 9 together.
Building societies cannot lend money except on security by the mortgage of freehold or leasehold estate or interest and I have no powers to authorise them to operate in the manner suggested by the Deputy.
Would the Minister not agree that, under the Building Societies Act brought in by the previous Government, there are discretionary powers to enable him to achieve the objective set out in that question?
The limitation under section 2 of the Act does not preclude societies from giving finance. Once they have the mortgage of freehold or leasehold estate or interest they can give a loan for this purpose.
It is a question of whether the Minister wants to encourage them to do so or not.
Does the Minister not consider that the lack of bridging finance for secondhand and new housing generally is a major problem in the house-building industry? Would he not agree that both he and the building societies have discretionary powers to overcome that problem and that there is a need to do something about it?
That is the limitation imposed on the building societies. The question of bridging finance is really a matter for the Department of Finance. The £10 million was made available through that Department. If my Department were responsible that money would have been made available through them. Whether the Deputy shakes his head or not, that is a fact.
I am not suggesting it is not a fact. What I am saying is——
The Minister for Finance might be very glad to talk to the Minister about it.
(Cavan-Monaghan): Does the Minister agree that once there is a mortgage the societies can provide bridging finance? Does the Minister not agree, and does it not make commonsense, that once a contract is entered into for a mortgage between the applicants and the building society the building society have what one might call an equitable mortgage, that is not the technical term, but they have a right to a mortgage? Why do they not provide the bridging finance on an undertaking from a solicitor backed up, if necessary, by collateral security? If they have all this money why do they not provide the bridging finance rather than rely on the banks whom the Minister for Finance will not allow to lend the money?
Once they have the mortgage of freehold or leasehold estate or interest they can give a loan for this purpose.
But they are not doing it.
Deputy Fitzpatrick is asking why they do not do so on an undertaking from a solicitor.
(Cavan-Monaghan): I am asking the Minister why he does not shake the building societies up as his predecessor did and get them to provide the finance which they have and not obstruct or withhold these loans for years.
They have to comply with the terms of the Building Societies Act.
That Act enables them.
Deputy Fitzpatrick is saying that the building societies should let the money go on an undertaking from a solicitor.
(Cavan-Monaghan): I am saying that once the contract is entered into they should provide the bridging loan on the same security as the banks would if they were allowed to do so.
They can do it within the meaning of that section of the Act.
(Cavan-Monaghan): But they are not doing it.
Would the Minister not agree, as Minister for the Environment responsible among other things for the construction industry, that in the present situation whereby the building societies on the one hand have a lot of cash, as witnessed by the statistics that he has produced, and, on the other hand house builders cannot close sales because of the lack of bridging finance, the whole role of the banks in this area is really redundant and the Minister could, if he so chose, exercise his discretionary powers within the law to close this gap as was the case in the past?
They can do so in accordance with that Act. I am even prepared to draw their attention to that fact.
That would be something.
Does the Minister accept, or is he appearing to refuse to see what is being said here, that despite what the Act says with regard to enabling the building societies to do as he says, that the point is being made that the Minister should try to bring about a situation where the building societies will be encouraged to do so, rather than just repeatedly referring to their ability to do it? The point is that they are not doing it. Also in regard to the information that he has given us in regard to building societies and their investment and house loan policies and so on, are the Minister's Department making their own independent inquiries irrespective of the submissions and responses from the building societies which might be slightly biased in favour of the building societies? What independent inquiries, apart from statements from the building societies, is the Minister basing these answers on? Where was the money invested during the time it was not invested in house loans?
I have not got that information.
It is in the Central Bank's report.
Am I right in saying that at the end of ten minutes' discussion that is the nub of the situation, the implication being that the money was somewhere else and the Minister does not not know where it was?
This information is not available in my Department.
The Minister is being deliberately obtuse all afternoon.
On a point of order, a few moments ago there were two asides made by Deputy Keating. I do not know whether they have been recorded or not but I hope they have because I intend to draw the attention of the Chair to them. Clearly the Chair did not hear the asides because if he had heard them I am sure he would have drawn the Deputy's attention to them and asked him to withdraw them.
What were they? I do not know what they were. All I said was that the Minister is being deliberately obtuse about the answers and I repeat that.
I did not get the point the Deputy made.
asked the Minister for the Environment the percentage of building societies' loan approvals currently delayed from final closure by (1) three months, (2) six months, (3) nine months and (4) 12 months.
This information is not available in my Department.
Does the Minister not think it is absolutely extraordinary that this information is not available, that the building societies who know what the information is have not provided it and, accepting reluctantly that due to the mismanagement in the Custom House it is not available, would the Minister, for the time that he remains Minister for the Environment, try to get the information?
Yes, I will.
11.
asked the Minister for the Environment if he has received representations from the Construction Industry Confederation or other parties in the construction industry outlining their concern at the effect of the shortage of bridging finance on house construction and building projects, and the measures he has taken—in addition to the moneys made available by the trustee savings banks—to ensure that the present scarcity of bridging finance will be alleviated.
I have received representations from the Construction Industry Federation and others about this matter and I am naturally concerned about and in constant touch with the situation. In this connection I would refer the Deputy to the reply to a similar question by him by the Tánaiste and Minister for Finance on 18 October 1979. The latest figures show that the amount of bridging accommodation outstanding by the associated banks was £182 million at mid-August, representing a 70 per cent increase over mid-August 1978, and a 43 per cent increase over mid-February 1979.
I am advised that, while conditions remain tight, bridging finance continues to be available. Building societies report that their approved applicants for mortgages continue to be able to get bridging finance. I am assured by the building societies that they are issuing mortgage loans as quickly as they can. In this connection they paid out the record sum of £58 million in the quarter ended 30 September last and estimate that they will advance an equivalent amount this quarter. These payments must have the effect of easing the situation.
(Cavan-Monaghan): Will the Minister agree that to the man in the street it seems a bit absurd that when an applicant negotiates a loan with a building society for, say, £16,000——
He negotiates?
(Cavan-Monaghan): Yes, he negotiates the approval and the loan is approved. He then has to go to the bank and negotiate bridging finance with them. Would the Minister investigate the possibility of getting the building societies to operate the entire transaction, and to provide the finance? What is going on at the moment does not make sense.
It may not make sense, but under the terms of the Building Societies Act they are prevented from doing so unless they have clear title, as we have been discussing recently. They will and can give approval for a loan to any person subject to conditions A, B and C, one of which would be the furnishing of a proper title. That will suffice for the bank to give a bridging loan but the building societies cannot give that bridging loan until they have proper title.
(Cavan-Monaghan): If the Minister looks into this thing closely enough he will find that once there is a contract between the applicants and the building society, the building society will grant a loan and the applicant will get a mortgage. On foot of that contract the building society should be able to provide bridging finance. If the Act needs to be amended to allow them to do that, the sooner it is amended the better. If the Minister comes in here with proposals to amend——
Question No. 12.
I would agree with the Deputy that it should be amended but this thing came to a head only in recent months.
Things have moved.
I agree with the Deputy that in order to facilitate people an amendment would be necessary and should be considered seriously.
(Cavan-Monaghan): The Minister is not firing any brickbats at me in that regard.
Does the Deputy see the point?
(Cavan-Monaghan): Delays must be cut out and every profession and Department of State——
I am calling Deputy Quinn while Deputy Fitzpatrick is making his speech.
So long as we do not forget the grants idea.
Deputies opposite are the people who stopped the grants.
We subsidised interest rates on mortgages.
(Cavan-Monaghan): Do not talk about cutting everything.
The Minister will be cut over the next weekend.
Obviously Deputy Killilea does not have to bother about getting bridging finance or mortgages. Having regard to the legal constraints which he has described, would the Minister consider the possibility of transferring to someone who has been approved for a loan with the building societies but who is unable to close because of lack of title and so forth, the benefit in terms of the interest earned by the loan approval? That would cost him about 14 per cent with the building society and it can be deposited at about 18 per cent with any other financial institution. In other words, the loan is approved in his or her name. It cannot be removed until such time as the sale is closed; it can be there for three, six or nine months earning interest at four per cent more than he or she would have to pay.
The Deputy has asked a question. There is no need to elaborate on it.
I want to ask one question. Perhaps I am not making myself clear to the Minister. Is there any way in which people are not caught in this usury situation?
The building societies claim that they prefer what gives a better return as far as they are concerned, that is loaning money for housing rather than other investments. I do not see how the 4 per cent difference arises in that respect.
About 30 per cent of their assets are currently invested in various securities.
It is a decreasing amount.
All earning more than 14 per cent.
