asked the Minister for Local Government if he is aware of the grave hardships being imposed on borrowers of loans from building societies due to delays occurring between the time of sanction and the actual issue of the loan; and if he will take all possible steps to alleviate such hardship.
Ceisteanna—Questions. Oral Answers (Resumed). - Building Societies.
28.
The arrangements made by building societies for processing applications for house purchase loans are a matter for the societies concerned and I have no function in the matter.
Is the Minister aware that applicants have been approved for loans and yet six months have elapsed without their receiving payment? They have to continue paying bridging finance which is causing great hardship on them. I appreciate that the building societies are a business of their own but I am sure it would be very much appreciated if the Minister would use his powers to have this situation remedied.
I have no power but I have tried my persuasion on building societies. I have asked them on a number of occasions to expedite the matter because I am aware of what Deputy Walsh says. It is only fair to say that, with the exception of one building society, I have not received complaints but I am aware that there have been long delays.
Would it be possible for the Minister to introduce legislation or a condition to ensure that loans approved by building societies are paid within a specified time, say three to four months? I have numerous people coming to me who have been approved for over six months but have no hope of receiving payment.
It would be very difficult to do what Deputy Walsh suggests because there might be complications and it might have the opposite result to what the Deputy suggests. The building societies could easily get over this by insisting that certain conditions were carried out which could in fact delay it. I dislike it just as much as Deputy Walsh does but I would like to point out that I have no power to tell them; they are not under the control of the Department. If Deputy Walsh would give me the names of some of the people concerned I might find out if there is any way in which the building societies could be jogged. I am not promising I can make them pay because that is a matter for the building societies.
I would urge the Minister to use his influence with the building societies. Is the Minister aware that the delay in granting these loans is causing an increase of £300 to £400 per house, which is a large amount of money?
I do not understand what the Deputy is referring to.
The difference between the bridging loan interest and the building society interest is raising the price of a house to the extent of £300 to £500.
I do not know how that could happen but it makes a point that the cheapest type of loans for building are building society loans.
Local authorities have the cheapest loans.
The local authorities loan money to certain people but those who cannot get money through them and have to go to a bank pay much more than they do through a building society.
This is the very point I am making. Would the Minister get after the building societies to ask them to pay those grants?
I cannot.
29.
andMr. Moore asked the Minister for Local Government if, pending the introduction of new legislation concerning building societies, he will introduce interim measures to afford some relief to borrowers.
Special assistance for borrowers from building societies has been provided by means of the temporary subsidy which the Government introduced in May, 1973. The subsidy enables the societies in present circumstances to pay 8 per cent tax paid, on shares while maintaining a mortgage rate not exceeding 11¼ per cent. If the subsidy were not in existence, the mortgage rate required would be 12½ per cent.
I see mention of new legislation on the Order Paper. When will it be introduced?
The new legislation on the Order Paper, which will be introduced after Easter, will not solve the problem Deputy Moore is talking about. There is no legislation proposed which will, in fact, make building societies loan money at a rate which would, as they say themselves, put them out of business. This is an entirely different matter. I do not want the House to be confused about this particular matter. One of the side effects might be that building societies might be able to have a marginal reduction in their expenses.
Is the Minister aware that because borrowers are experiencing undue delay in getting money certain builders in Dublin are increasing the price of a house—notwithstanding the fact that they quoted a fixed price—by, in some cases, up to £500.
Builders cannot increase the price of houses because there has been a delay in the payment of loans. If the houses have been completed and they have their certificate of value they cannot get a certificate of increased value on the basis that they are waiting for building societies or any other finance. They will have to think of a better excuse than that. They will have to have a very good reason to allow them to increase the cost. If Deputy Tunney has any case in mind where this has been done for that reason I would be very grateful to him if he would bring the matter to my notice because I can do something about it.
Is the Minister aware that people with very limited means who have been faced with two increases of interest rates on their mortgages within the past year are now finding the strain almost unbearable? Does he not think he should have some legislation introduced that would tie this interest rate to a reasonable figure and not remove the subsidy and throw them to the mercy of the building societies again? Can the Minister do this?
As I have explained it is not just possible to do that. There is no financial body which will borrow money and re-lend it at a lower rate than they can afford. This is what the building societies would have to do if this House insisted that they should loan money at a fixed rate of interest. It would not allow them to pay an interest rate to encourage borrowers to place money with them. As it stands the building societies, I am quite sure, must be finding it difficult to compete with the high rates of interest which are being paid by other financial houses. I do not want to give anyone the impression that it is possible just by passing an Act in this House to reduce the rates which are being paid by people who want to build houses and who have to borrow money.
Question No. 30.
Is the Minister aware——
I am sorry, Deputy. We have got to pass on. I have given Deputies a lot of latitude on this question, an important one admittedly, but all questions are important.
I can assure you I do not raise this matter lightly.
I can appreciate that.
I have had more representations in relation to this since I came into this House than I have had about any other matter.
The Chair appreciates this very much.
I was asked to raise this matter by some of those people. It is my duty to raise this.
The Deputy has raised it.
The Minister indicated that at present a subsidy exists to help these people. Am I right in that?
Yes.
I am afraid we cannot prolong this discussion much longer.
The Minister said he is subsidising these people at the moment. What is to prevent him holding on to this subsidy to help these people out?
It is a matter of money. It would take a sum of £2 million per year to pay a 1 per cent subsidy. If the Deputy can say where the necessary money would be found for what is being asked by some people I should like to hear it. If the subsidy was increased it would add another 3 per cent, another £6 million, but I could find better ways of spending that money than subsidising the building societies.