asked the Minister for Finance if he will consider allowing local authorities to benefit from the current favourable interest rates by agreeing to waive the current penalty clause on the redemption of loans from the local loans fund; and if he will make a statement on the matter.
Written Answers. - Local Loans Fund Mortgage Redemptions.
144.
The penalty clause for early redemption of loans to the Local Loans Fund applies in effect only in the case of fixed-interest loans. It was designed to discourage borrowers from the fund from redeeming existing loans and reborrowing at the lower rate of interest if the rate of interest fell.
I appreciate, however, that some local authorities are facing difficulties if many householders redeem mortgages early and the local authority has to continue paying the Local Loans Fund at a higher fixed interest rate while it relends the money to other purchasers at the current variable interest rate which is lower.
It would not be justified to remove entirely penalties for early redemption of fixed-interest loans. However, I am examining, in consultation with the Minister for the Environment, possible ways of dealing with the loans to local authorities where there are a large number of early redemptions by householders.