Interest rates charged to local authority borrowers are determined by the Board of the Housing Finance Agency (HFA). In determining these rates, the Board of the Agency gives careful consideration to the fluctuating relationship between the rates at which it can borrow and its lending rates. The HFA is required to operate on a break-even basis and continues to provide extremely good value to local authority customers. The rates available to local authority borrowers have traditionally been O.5% lower than the best available rates in the market. However, that differential now stands at approximately 1.5%.
The Board of the HFA decided last week to further reduce rates charged to local authorities by 0.3%. Guidance issued by my Department to local authorities following the Board's decision outlined the details of a new Mortgage Arrears Resolution Process to assist those local authority mortgage holders who are in distress in the same way as is available to those with commercial mortgages that are in a similar position. Funds to provide a financial framework within which the cost of this initiative can be met by local authorities will be generated by the savings accruing to local authorities from the HFA's rate reduction.
