Vol. 543 No. 2
85 Mr. Browne (Carlow-Kilkenny) asked the Minister for the Environment and Local Government the action which is planned to reduce the high fixed interest rates being paid for many local authority loans; and when those paying these high rates will be given relief. [26128/01]
93 Mr. Higgins (Mayo) asked the Minister for the Environment and Local Government if he proposes to review the possibility of relief for mortgage holders (details supplied); and if he will make a statement on the matter. [22826/01]
95 Mr. G. Mitchell asked the Minister for the Environment and Local Government if, further to Parliamentary Questions Nos. 158 on 18 October 2001 and 711 on 3 October 2001, he will state when the first survey of local authorities took place in relation to high fixed interest rates; the number of loans involved; when the local authorities were asked for additional information; the number of local authorities which have responded to date; the number of additional cases that came to the notice of the Department; the date set by him for the completion of the analysis; the amount of additional interest being paid over the market rate for the year 2000; the forecast for 2001; the measures that he is considering to address the question; the date on which he will make proposals to relieve this situation; and if he will make a statement on the matter. [25717/01]
513 Mr. Allen asked the Minister for the Environment and Local Government his plans to relieve the burden of high rates of interest paid by persons who took housing and reconstruction loans from Cork Corporation; and if he will make a statement on the matter. [26530/01]
I propose to take Questions Nos. 85, 93, 95 and 513 together.
Certain fixed interest rate loans issued by local authorities prior to 1988 carry rates in excess of current levels. These fixed interest rates reflect the cost of long-term funds prevailing at the time the loans were advanced and are fixed for the life of the loan. The cost of reducing the fixed rates on these loans would be considerable and would have to be borne by the Exchequer, the Housing Finance Agency or the local authorities.
Since 1980, borrowers with local authority fixed rate mortgages are free to redeem such loans without any interest rate penalty and refinance them in the private sector. This is a very significant concession. Borrowers with fixed rate mortgages from commercial lending agencies are obliged to pay significant redemption penalties of up to six months interest, or more, in the event of early redemption.
On 25 February 2000 my Department undertook a survey of local authorities to determine the extent of remaining high fixed interest rate loans. The results of that survey showed that there were almost 44,000 individual fixed rate housing loans outstanding at that time, of which 38% were at 12.5% interest rates and the balance at rates under 12.5%. The average amount outstanding on an individual loan was less than £5,200, 6,602.63.
In May of this year, it was established that the information supplied in response to the survey did not, in some cases, include tenant purchase loans. In view of this my Department requested all local authorities on 21 May 2001 to review, and update if necessary, the information supplied.
Of the 42 local authorities issuing housing loans, 35 have responded to date to this second request. The number of additional cases included in the responses received to date is just over 19,000 which brings the overall total of fixed rate housing loans to some 63,000 and the average amount outstanding on individual loans to around £5,000, 6,348.69. My Department has consulted on a number of occasions with the remaining seven local authorities to establish the additional cases, if any, in these authorities and it is hoped to have their responses shortly.
It is estimated that the cost of a reduction in the high fixed interest rates to the current local authority fixed rate of 5.3% would be in the region of £11 million in the first year declining thereafter as loans are paid off. My Department is examining the possible options in relation to these loans.
