Dáil Éireann Debate, Thursday - 8 September 2022
506. Deputy Richard Bruton asked the Minister for Housing, Local Government and Heritage the current interest rate charged on a local authority home loan; the way that it is adjusted as European Central Bank-sanctioned interest rates changes; and the equivalent monthly charges per €1,000 borrowed on a 30-year loan. [44205/22]
Amharc ar fhreagra507. Deputy Richard Bruton asked the Minister for Housing, Local Government and Heritage the extra charge on a local authority loan to cover mortgage protection; if this is subject to change; and the equivalent monthly charge per €1,000 borrowed on a 30-year loan. [44206/22]
Amharc ar fhreagraI propose to take Questions Nos. 506 and 507 together.
The Local Authority Home Loan is a Government backed mortgage scheme for those on modest or low incomes who cannot get sufficient funding from commercial banks to purchase or build a home. It has been available nationwide from local authorities since 4 January 2022 for first-time buyers and fresh start applicants. The loan can be used both for new and second-hand properties, or to self-build.
Local authorities borrow from the Housing Finance Agency to finance their lending under the Local Authority Home Loan scheme. Following engagement with the Department of Public Expenditure and Reform, sanction for new lending of up to €250 million was secured for the scheme in 2022.
The rate of interest on a housing loan shall be such rate as may be fixed from time to time by the Minister, provided that the rate shall not be less than the rate at which money is lent to housing authorities by the Housing Finance Agency for the purpose of making such housing loans. As such, the interest rate is not directly linked to ECB refinancing rates; however, as the cost of finance to the HFA is determined by the cost of finance on international markets, the monetary policy decisions of the ECB do ultimately have an influence. Loans issued under the Local Authority Home Loan must be on a prudential basis so as to protect the financial interests of both borrowers and local authorities, which may result in interest rate changes for future funding tranches.
The local authority mortgage protection insurance scheme has applied to all house purchase loans approved by local authorities after 1 July 1986, including the Local Authority Home Loan Scheme scheme. Local authority mortgage protection insurance is currently charged at the rate of 0.5348%, this rate does not vary between local authorities.
The total interest rate charged to local authority borrowers, including the LA Mortgage Arrears Resolution Process Premium Fund as well as Mortgage Protection Insurance, brings the all-in cost of the new loans to:
- 3.3798% for loans with terms of up to 25 years, and
- 3.4798% for loans with terms of over 25 years and up to 30 years
Based on a €200,000 loan over 30 years, the average monthly repayment is €926.42 at an interest rate of 2.945% and inclusive of 0.5348% Mortgage Protection Insurance.
Further information on the Local Authority Home Loan Scheme can be found here: www.localauthorityhomeloan.ie
The most recent public procurement competition for the provision and administration of this MPI scheme was conducted by the Local Government Management Agency. The contract resulting from this open tender competition came into effect from 1 January 2022 and is due to expire on 31 December 2022. My Department will review the provision and administration of the MPI scheme prior to that date.
