Houses sold under the various affordable housing schemes at a discount from market value contain a clawback provision, which is necessary to ensure that there is no short-term profiteering on the resale of a house. In the traditional circumstances where local authorities were the sole supplier of mortgage finance for affordable housing, authorities registered the clawback as a charge on the mortgage deed or, in the case of shared ownership transactions, inserted it as a clause or condition in the lease. This allowed them as lenders to readily enforce the clawback.
Following extensive discussions with my Department, two of the main financial institutions have introduced schemes of mortgage financing for persons who wish to access affordable housing. These mortgage products were introduced consequent to agreement with the institutions on the rankings of the various charges, which included provision for a clawback as a charge on the property. Discussions are under way with several other leading private lenders with a view to initiating similar products.
Since the introduction of these mortgage products, some difficulties have been encountered by persons wishing to remortgage with the private lenders. It is reasonable for a local authority to allow remortgage through a private lender provided the clawback provision is fully protected and it would be a matter for the local authority in such cases to ensure that the clawback can be imposed as provided for in legislation. However, with a view to achieving a widely agreed solution for this kind of case, my Department is in communication with the private lenders about standardising arrangements. I hope that these will be finalised and put in place as soon as possible.