Dáil Éireann Debate, Wednesday - 11 October 2023
129. Deputy Róisín Shortall asked the Minister for Housing, Local Government and Heritage the reason local authority home loan mortgage interest rates have risen; his views on this increase; if he is aware of commercial banks now offering lower fixed rates than the State backed scheme; and if he will make a statement on the matter. [44347/23]
Amharc ar fhreagraThe Local Authority Home Loan is a Government-backed mortgage for those 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.
The Housing Finance Agency (HFA) provides financing to local authorities to fund the provision of local authority mortgages. The HFA’s cost of funding is based on sovereign funding costs, and these have also risen significantly in the same period, which drives the interest rate increases to Local Authority borrowers. Commercial lenders have also raised their interest rates significantly in recent years.
The HFA advised recently that due to a rise in the long-term wholesale interest rate and increased interest rate volatility, the funding it provides for new loans drawn down under Local Authority Home Loan (LAHL) had to increase by 0.65% and 0.60% for 25 and 30 year terms respectively. Consequently, this has resulted in increases to rates for borrowers.
The LAHL however remains an attractive loan product and is priced competitively compared to the most comparable commercial mortgages. The 30 year mortgage rate of 4.05% is the cheapest for a comparable long term fixed rate mortgage on the market. It should be noted that while cheaper rates may be available from commercial lenders, these are generally for shorter term mortgages, or mortgages at lower loan to value ratios, which are not directly comparable to LAHL mortgages.
