Dáil Éireann debate -
Tuesday, 3 Feb 1998

Vol. 486 No. 3

Written Answers. - Local Authority Loans.

Seán Barrett

Question:

66 Mr. Barrett asked the Minister for the Environment and Local Government the reason tenants who purchased their dwellings under the terms of the 1993 and 1995 sales schemes and obtained variable rate interest loans from local authorities had an increase in the interest rate from 1 October 1997 at a time when interest rates being charged by other lending institutions were reduced; and if he will make a statement on the matter. [2387/98]

Minister of State at the Department of the Environment and Local Government (Mr. Molloy)

Tenants who purchased their dwellings under the terms of the 1993 and 1995 sales schemes had the option of obtaining mortgage finance from commercial lending agencies or by way of loan facilities from the local authority. The necessary funds for the local authority loans are provided by the Housing Finance Agency.

The interest rate on local authority variable rate housing loans is determined by the Housing Finance Agency by reference to rates prevailing in the financial market. The rate is linked generally to building society mortgage rates and is at present 7.2 per cent, exclusive of 0.7 per cent for mortgage protection insurance. This compares favourably with current building society rates generally.

Following an increase in early May 1997 of 0.5 per cent in the Central Bank short-term facility rate, commercial lending institutions, including building societies, increased their mortgage lending rates by, on average, 0.5 per cent. These increases in some cases would have become effective for building society borrowers from as early as June, 1997.

However, a corresponding increase in local authority variable interest rates was delayed until September, 1997 when the rate was increased by 0.45 per cent. The Housing Finance Agency is keeping the interest rate under review in the light of trends in the market.