The local authorities' 1986 mortgage protection scheme has applied, subject to the terms of the scheme, to all house purchase loans approved by local authorities on or after 1 July 1986. The terms of the cover under the scheme was negotiated by a sub-committee of the County and City Managers' Association, the Housing Finance Agency and a representative of my Department. These terms are renegotiated periodically by the committee.
The cost of the scheme is met by way of an additional charge, currently 0.598%, to the rate of interest charged on individual loans. One of the conditions of the scheme, which is a group policy, is that it is obligatory for all local authority borrowers who meet the eligibility criteria to join the scheme. Altering this condition would have a negative impact on the scheme and increase the cost for all existing borrowers. Borrowers who have existing loans with local authorities have the option of redeeming these loans and refinancing in the private sector.