Vol. 575 No. 3
332 Mr. Ring asked the Minister for the Environment Heritage and Local Government the reason local authorities are not charging a more competitive interest rate on their loans; the action he intends to take in relation to the high interest rates being charged on loans taken out many years ago; and if anything can be done for persons in this situation. [28176/03]
The current local authority mortgage interest rates are 2.95% variable and 4.45% for five year fixed, which represent competitive rates of lending. 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 the long-term funds involved.
Since 1980, borrowers with local authority fixed rate mortgages have been permitted to redeem such loans without any interest rate penalty and refinance them in the private sector. This represents a significant concession, having regard to the redemption penalties, of up to six months interest or more, applied by commercial lending agencies in the event of early redemption of such mortgages.
The position regarding high fixed interest rates on local authority loans was reviewed in November 2001, in consultation with the Department of Finance. This review determined that a State subsidy to reduce interest rates would not be appropriate.
