The Local Authority Home Loan is a Government backed mortgage scheme for those who cannot get sufficient funding from commercial banks to purchase or build a home. It has been available nationwide from local authorities since 4 January 2022 for first-time buyers and fresh start applicants. The loan can be used both for new and second-hand properties, or to self-build.
Local authorities borrow from the Housing Finance Agency to finance their lending under the Local Authority Home Loan scheme. Following engagement with the Department of Public Expenditure, NDP Delivery and Reform, sanction for new lending of up to €250 million was secured for the scheme in 2023.
The rate of interest on a housing loan shall be such rate as may be fixed from time to time by the Minister, provided that the rate shall not be less than the rate at which money is lent to housing authorities by the Housing Finance Agency for the purpose of making such housing loans. As such, the interest rate is not directly linked to ECB refinancing rates; however, as the cost of finance to the HFA is determined by the cost of finance on international markets, the monetary policy decisions of the ECB do ultimately have an influence. Loans issued under the Local Authority Home Loan must be on a prudential basis so as to protect the financial interests of both borrowers and local authorities, which may result in interest rate changes for future funding tranches.
The Housing Finance Agency (HFA) advised recently that due to a rise in the long-term wholesale interest rate and increased interest rate volatility, that the fixed interest rate for all new loans drawn down under the Rebuilding Ireland Home Loan (RIHL) and Local Authority Home Loan (LAHL) will increase by 0.65% and 0.60% for 25 and 30 year terms respectively. This increase incorporates funding conditions experienced in recent months. Consequently, this has resulted in increases to rates for borrowers.
The increases to be charged to new borrowers for loans drawn down after 1pm on Thursday 28 September 2023 onwards are as follows:
• For mortgages up to 25 years the interest rate to be applied will be increased from 3.35% to 4%
• For mortgages over 25 and up to 30 years the interest rate to be applied will be increased from 3.45% to 4.05%
The total cost to local authority borrowers for new loans is set out below. These include the LA Mortgage Protection Insurance. The local authority mortgage protection insurance scheme has applied to all house purchase loans approved by local authorities after 1 July 1986, including the Local Authority Home Loan scheme. Local authority mortgage protection insurance, for life only cover, is currently charged at the rate of 0.182%.
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LOCAL AUTHORITY HOME LOAN Interest Rates (new loan from 28/9/23)
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Fixed rate for terms of up to 25 years
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Fixed rate for terms over 25 years up to 30 years
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Interest Rate charged to local authority borrowers
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4%
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4.05%
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MPI (life only)
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0.1820%
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0.1820%
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TOTAL COST TO BORROWER including MPI
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4.182%
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4.232%
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The total payment per month per €1,000 of a loan therefore is:
• 25 Year loan: €5.43 (€5.28 + €0.15)
• 30 Year loan: €4.95 (€4.80 + €0.15)
Further information on the Local Authority Home Loan Scheme can be found at localauthorityhomeloan.ie/
