asked the Minister for the Environment if his recent announcement regarding changes in the Housing Finance Agency will mean increases in the repayments by borrowers.
Ceisteanna—Questions. Oral Answers. - Housing Finance Agency Loans.
33.
There will be no increase in the repayments of existing Housing Finance Agency borrowers arising from my recent announcement.
The Minister referred to existing borrowers. What about new borrowers?
I gather that agency are considering the introduction of a minor increase in respect of new borrowers, but there is no decision on that.
This scheme was introduced with a great blowing of trumpets at the end of 1981. It was supposed to be the solution for all house purchase problems. The financing was to be done in a very special way. Does the Minister agree that the original funding arrangements and percentage repayments by borrowers have collapsed and that this is the SDA scheme under another name?
I find it extraordinary that all of the successful schemes, like the house improvement scheme and the Housing Finance Agency scheme, and the range of incentives introduced by the Government to help people to build and to improve their homes, are under constant attack and criticism from Deputy Burke.
They are not working out.
Since the agency was set up it has advanced 13,100 loans to the total value of £279 million. At present there are 3,600 applications to a value of over £80 million, of which 2,045 applications have been approved. That indicates clearly that the agency has played a significant part in enabling many people of moderate means who could not otherwise hope to obtain housing finance the opportunity to purchase their own homes. Great credit is due to the agency and its operations in that short period
Does the Minister not accept that if this scheme had been working as intended he would not have had to pump £7 million of taxpayers' money into it? Has the theory of the scheme not totally collapsed and are we not now talking about the direct funding of the scheme?
That is not so. The agency ran into difficulties because its single borrowing instrument was inflation related. With the fall in the rate of inflation that type of arrangement was no longer attractive on the finance market. The rate of demand by borrowers meant that the agency had to raise a certain amount of finance in the recent past — it had to resort to short-term borrowing to find the finance to fund the loans. In effect, the agency was borrowing short and lending long. We have now changed that to allow the agency to borrow by a range of instruments on both domestic and international markets. We have continued the income-related loan arrangement and we have introduced a new provision whereby a borrower can borrow on an income-related basis for the first five years of the loan, convertible thereafter to an annuity. It was always the intention of the Government that SDA loans should be brought more closely into line with HFA loans as time went on.
I announced earlier during Question Time before the Deputy came in that I had increased the size of SDA loans from £16,000 to £21,000 and from £20,000 to £25,000 in respect of normal and special category loans respectively and that the income limit has been increased from £8,000 to £10,000. That means the income limit for an SDA loan is similar to the income limit applying for the HFA loan and the size of SDA loans is much nearer to that of HFA loans being offered, namely, £22,500 and £27,000 for the normal and special categories. It is the intention of the Government that, over a period as the agency replace their short-term borrowing on the market through using the different instruments now available, they will also take on the funding requirement for SDA-type loans. That means that three different types of loans are available through Government sources to people of modest income to enable them to purchase their homes. The agency have done a commendable job and they deserve the gratitude of the House rather than this constant carping.
That has been a long way around to give the simple answer "yes" to my question. Will the Minister not agree that the original intention of the agency was that they would be funded from pension funds and other sources that were not available and that were not tapped at that stage and will he agree that that structure has now collapsed? We are back to direct funding by the Department of Finance. It may be called indirect funding through the agency but the reality is it is funding by the Department.
No, that is absolutely wrong. The Deputy does not seem to understand the arrangements introduced by the Government. In future the HFA will be enabled to borrow by way of a range of instruments on the financial markets, both domestic and foreign. The reason the single type of instrument under which the agency were empowered to borrow up to now became unattractive was the singular success of the Government in reducing inflation. The borrowing was inflation-related and once inflation fell that kind of loan became unattractive on the financial market.
I do not believe it.
It is a rope around people's necks.
It is a home over their heads.
I am calling Question No. 34.