Peter Mathews (Dublin South, Fine Gael)
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Question 281: To ask the Minister for Public Expenditure and Reform, further to parliamentary Question No. 178 of 13 December 2011, if the Exchequer funded the local loans fund through the use of 30 year bonds and, if not, his views on this Deputy's calculations (details supplied) showing that the local loans fund is making a large profit from local authorities; and if he will make a statement on the matter. [40952/11]

Brendan Howlin (Wexford, Labour)
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The Local Loans Fund was created as a mechanism to provide loans to local authorities for various purposes including on-lending to individual house purchasers under the Small Dwellings Acts. Funds were made available to the Local Loans Fund from general Exchequer sources, which would include general Exchequer borrowing. There is no direct link between particular Government bonds and long term loans made available to local authorities by the Exchequer.

In 1982, the interest rate for loans provided from the Local Loans Fund to local authorities for on-lending to individuals under the Small Dwellings Acts was fixed at 12% for the life of the loan. Since 1989, individuals who have mortgages from local authorities have been permitted to redeem their loans early without penalty. This has allowed individuals to freely exit from local authority mortgages, thus giving them the opportunity to access any other funding options available.

Local authorities are permitted, in turn, to redeem without penalty Local Loans Fund loans of matching amounts and at matching interest rates to the individual loans redeemed.

The Local Loans Fund is no longer used as a mechanism to provide loans to local authorities. Other funding arrangements have been put in place. All repayments by local authorities to the Local Loans Fund flow into the Exchequer.