Vol. 347 No. 3
asked the Minister for the Environment if he is satisfied with the operation of the Housing Finance Agency loan scheme and that borrowers under the scheme will not find themselves in serious financial trouble after a number of years; and if he will make a statement on the matter.
3.
asked the Minister for the Environment if he is satisfied that people are made fully aware of the long-term financial implications of the Housing Finance Agency loan scheme; and if he will make a statement on the operation of the loan scheme.
I propose to take Questions Nos. 2 and 3 together.
I am satisfied with the operations to date of the Housing Finance Agency loan scheme since loan repayments will continue to be income-related. I do not consider that borrowers under the scheme will find themselves in financial trouble after a number of years. Borrowers are fully aware that the relatively low repayments permitted under the scheme in the early years mean that the debt outstanding will be higher in later years than if the loan was being repaid in the conventional manner.
The agency has been successful in bringing private funds into housing and its loan scheme has been a significant contributor to the housing programme and the building industry in the present difficult times. The agency's scheme by its lower initial deposits and repayments has brought home ownership within the reach of persons who might not otherwise be able to provide their own houses. Since the first loans were advanced in September 1982 until 31 December 1983 about 3,650 loans valued about £71 million have been paid out.
If the people who have obtained such a loan continue to repay at the permitted lower level of 18 per cent of their income, is the Minister aware that they may well have an accumulation of debts which will remain against them and the particular house for ever and a day?
That is not quite true. The loan stretches over a period of 23 years, at which point it has been extinguished by repayments during that period.
Is the Minister aware that many local authority officials throughout the country who are dealing with Housing Finance Agency loans are gravely concerned about the difficulties which people will encounter in a matter of five, six or seven years?
I am not aware of these difficulties. However, given the interest shown by a number of people continuing to demand such loans, I am satisfied that the loan meets a particular need and that the disadvantages envisaged by the Deputy will not arise.
The Minister has mentioned a period of 23 years during which repayments would be made, which was the case when the loan was first initiated. Would he accept that in many cases on today's figures it would be up to 50 years before such a loan would be repaid and that it would not be the borrowers of the loan but their families who would find the mortgage still around their necks?
Undoubtedly, the period over which a loan is repaid is a long one. However, under any other loan system such as the SDA, a very long time elapses before a loan is cleared. In that case the same problem might arise, that the person originally taking out the loan might have died and repayment would then be the responsibility of the next of kin. There is no difference between one type of loan and another as regards what might happen in the distant future.
Of course, there is.
On what initial figures is the Minister basing the 23 year loan repayment period and on what rate of inflation?
I am basing it on the figure of £21,300 outstanding nominal rate, assuming an interest rate of 13.25 per cent. At the moment the interest rate is lower.
Would the Minister agree that the system of operation of the Housing Finance Agency makes it almost impossible for somebody who has obtained a loan under that scheme to move house again? While under any other type of loan, such as local authority or corporation in the old form, or building society, the payments were or are higher in the earlier years, whereas under the Housing Finance Agency system to continue the tradition of moving house is virtually impossible. I know that detailed submissions have been made regarding improvements in the conditions of such a loan. Does the Minister make any recognition of these, or does he discount the arguments of members of the construction industry about the benefit of changing the present proposals and the ceiling on the amount of loan which can be got?
In answer to the first supplementary question, I certainly must agree with the Deputy that there might be a difficulty in trading up, as a person might not have a balance of cash by simply selling off a house under this agency. That is undoubtedly a difficulty which I do not wish to hide from anybody who is considering this type of loan. However, this difficulty is pointed out at the very beginning when a person is considering taking out such a loan. One has to weigh against that the possibility of many people not being in a position to house themselves or reap the benefit of the HFA loans scheme. If we had to consider the loan simply on the basis of a trading-up situation, then that would not be quite fair to the people who now need to be housed and who would have to go on to the housing lists if the HFA loan was not there. I should say that I am considering certain changes in limits and so on.
Will the Minister give consideration to extending the loan to people who, because of redundancy or unemployment, have found themselves unable to meet their repayments as of now, which people are going back on local authority housing lists just because they cannot avail of the Housing Finance Agency loan? It would be very worth while if the Minister would give that consideration.
I will give consideration to the point raised by the Deputy.
Would the Minister agree that if the scope of the SDA loans scheme was widened — by increasing the qualifying limits and loan amounts — and also if some discretion was allowed to local authority officials to work within the terms of the SDA loans scheme, that would be far more practicable than the new HFA loan scheme which at present is causing so much confusion?
The Deputy will agree that the institution of the HFA loan allowed the Government to bring in money from outside, money which would otherwise have had to be raised by loan or taxes elsewhere were we to do what he suggests. This scheme has allowed us to bring in money from outside sources, reap its benefits, and be in a position to offer more people a chance of being housed. The SDA loans scheme, either in its limits, with regard to the capital amount or income limits, whereas useful in its own slot, is supplemented by this new scheme and is complementary to the whole approach to people being housed. Therefore, taking the situation as a whole into account, this is a very useful operation as well as having the SDA loans scheme operative.
What amount would be due by a person taking out the maximum loan of £22,500? What would be due on account of that loan by way of capital after ten years repayment?
I will let the Deputy have that information.
Would it be £50,000?
I believe it is in the region of £50,000 which, measured by any yardstick, constitutes an enormous burden to be placed on any couple or any person.
I do not think it would be that much. I will let the Deputy have that information when I receive it.
