Willie Penrose (Longford-Westmeath, Labour)

I thank the Deputy for raising this important matter. The Government is acutely conscious of the difficulties many households are facing in terms of mortgage arrears. Against this background, its Economic Management Council, prior to the summer recess, requested an interdepartmental group to consider further necessary actions to alleviate the increasing problem of mortgage over-indebtedness and report to it by the end of September. The outcome of the work done by the group which was chaired by the Department of Finance and comprised representatives from other relevant Departments, the Central Bank and expertise from the banking sector, has been presented to the Economic Management Council. The Minister for Finance will bring the report to the Cabinet very shortly, after which it will be published.

To date, there is no evidence to suggest wider economic circumstances are creating problems specifically for local authority borrowers in meeting mortgage repayments. The most recent published data available to me are the service indicators 2009, published in February 2011. These show the local authority mortgage arrears level running at 15.08%, a marginal increase on the level in 2008 - 11.6%. I know the Deputy has outlined his experience. A total of 16.17% of mortgage accounts in the private sector are now either in arrears for 90 days or more, or have had their mortgage restructured. This shows that despite local authorities' role as lenders of last resort, generally providing loan finance to the lowest income home buyers, the level of mortgage distress is no worse than for other higher income categories of borrower. Similarly, despite worsening economic conditions generally, repossession remains extremely rare for local authority borrowers, with only 128 repossessions across all local authority areas carried out between 2005 and 2010. Clearly, where repossession does occur it is only as a last resort, and my Department is aware that it generally involves those households in arrears who refuse to engage with the local authority lender.

Local authority borrowers have received considerable protection from the worst effects of the downturn in terms of their borrowing costs. The effective rate for borrowers has come down by 2% since the end of November 2008 and now stands at just 3.25%. These rates represent exceptional value when compared with rates charged by commercial lenders. As of now, the local authority rate is more than 1% lower than the average market variable rate.

Provisions regarding lending by local authorities for the purposes of house purchase are set out in section 11 of the Housing (Miscellaneous Provisions) Act 1992. Where a loan stands in default, section 11(10) of that Act and, more recently, section 34 of the Housing (Miscellaneous Provisions) Act 2009, provide that a local authority may make such monetary arrangements with a borrower as the authority considers equitable to take account of the particular circumstances of the borrower.

I hope that every effort is made to contact the local authority to see what compromise can be made on monetary arrangements with the borrower. I have no doubt that people like Deputy Stanley, who are in constant contact with the housing section of local authorities, would ensure this is done. Local authorities have the power to take the situation into account and to come to an agreement that is considered equitable, taking into account the particular circumstances of the borrower. I trust that most people are availing of the opportunity for discussions with the lender.

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