Vol. 505 No. 6
45 Mr. J. O'Keeffe asked the Minister for the Environment and Local Government his views on the situation where home owners who arrange to purchase their houses with the aid of local authority loans must continue to pay interest at the rate of 12.5 per cent; and if an arrangement will be put in place which will enable these borrowers to avail of the current level of low interest rates which are but a small faction of the amounts they are paying. [14329/99]
The interest rate of 12.5 per cent which applies to some local authority fixed rate house purchase loans issued before 31 October 1985 is related to the cost of long-term funds prevailing at the time the loans were advanced and is fixed for the life of the loan. While these fixed interest rate loans of up to 12.5 per cent look expensive today, they were in fact very favourable at the time they were advanced in the late 1970s and early 1980s when commercial lending rates ranged anything up to 16.25 per cent. In addition, the loans involved in any case typically ranged from £9,000 to, at most, £16,000 and the average price of houses purchased with the aid of these loans was generally between £16,000 to £25,000. The cost of refinancing these mortgages today would be substantial and would have to be borne by either the Exchequer, the Housing Finance Agency or the local authorities.
