Vol. 534 No. 2
56 Mr. D'Arcy asked the Minister for the Environment and Local Government if he will allow county councils and corporations reduce the interest rates of 12% on fixed interest rates on SDA loans to the current prevailing rates; and if he will make a statement on the matter. [10060/01]
Certain fixed interest rate loans issued by local authorities prior to 1988 carry rates in excess of current levels. These fixed interest rates reflect the cost of long-term funds prevailing at the time the loans were advanced and are fixed for the life of the loan. The costs of reducing the fixed rates on these loans would be substantial and would have to be borne by the Exchequer, the Housing Finance Agency or the local authorities.
Since 1980 borrowers with local authority fixed rate mortgages are free to redeem such loans without any interest rate penalty and refinance them in the private sector. This is a significant concession. Borrowers with building society-bank fixed rate mortgages on the other hand are obliged to pay significant redemption penalties of up to six months interest or more in the event of early redemption.
A survey of local authorities, carried out by my Department last year, indicated that the average amount outstanding on individual fixed rate loans was less than £5,200. In the past five years the amount outstanding to the local loans fund in fixed interest rate loans has reduced significantly, from some £500 million to £135 million currently. This indicates that many borrowers have availed of the concessionary terms for redemption. Many of the loans outstanding would be at interest rates of less than 12%.
Question No. 57 answered with Question No. 25.
