The current variable interest rate to local authority borrowers is 2.95%, which represents a competitive rate of lending. A fixed interest rate is not available for shared ownership loans. The interest rate on local authority housing loans, including shared ownership mortgage loans, is determined by the Housing Finance Agency by reference to mortgage rates prevailing in the financial market. Local authority loan rates compare favourably with the equivalent rates charged by commercial lending agencies.
It is not proposed to change these current arrangements. These were revised, with effect from 1 January 2003, so that loans to repay the local authority equity in shared ownership transactions would be provided from variable interest rate loan finance instead of index linked finance.