Dáil Éireann Debate, Thursday - 24 September 2015
216. Deputy Bernard J. Durkan asked the Minister for the Environment, Community and Local Government if he will further review the shared ownership mortgages issued by local authorities over recent years which have been affected by a 4.5% annual increase in the rental equity of the property with obvious consequences for the purchasers; and if he will make a statement on the matter. [32682/15]
View answerMy Department, with the assistance of the Housing Agency, the Housing Finance Agency and the Local Authority Housing Loans Management Group, has been examining the operation of the Shared Ownership Scheme for existing borrowers. The issues arising with Shared Ownership Schemes require careful consideration and expert financial data analysis. Arising from the findings of the review to date, the Index Linked Shared Ownership Scheme which operated from 1999 until 2002 has been revised with regard to the annual indexation of the rental equity balance and rental payments. The amendments, which take effect from the 1 July 2015, will reduce the monthly cost for these borrowers and avoid existing rental equity balances increasing for the remaining term. My Department has issued directions to local authorities outlining the measures and I understand that these changes are being applied to individual loan accounts.
The more recent Shared Ownership Scheme that operated from 2003 to 2011 provides a formalised mechanism for the borrower to pay off the rental equity portion of the arrangement over the course of the term of the loan agreement. Integral to this mechanism is the provision for the compounding of the rental charge by 4.5% per annum. Reducing this annual compounding would have the effect of reducing the borrower’s contribution to paying off the rental equity balance, thus extending the term of the loan agreement and delaying the transition to full ownership.
My Department, together with the other agencies, is continuing to examine the operation of Shared Ownership loans and issues arising for some borrowers, with a view to developing further measures that may assist with the affordability of these arrangements.
