Tom Sheahan (Kerry South, Fine Gael)
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Question 27: To ask the Minister for the Environment, Heritage and Local Government the number of applicants to the home choice loan scheme; his views on opening this scheme up to previously owned homes; and if he will make a statement on the matter. [25190/09]

Mary Upton (Dublin South Central, Labour)
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Question 56: To ask the Minister for the Environment, Heritage and Local Government the number of people to date who have made a full application under the home choice scheme; the cost to date of administering this scheme; and if he will make a statement on the matter. [25061/09]

Martin Ferris (Kerry North, Sinn Fein)
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Question 60: To ask the Minister for the Environment, Heritage and Local Government the number of loans which have been drawn down under the home choice loan scheme since its inception; the cost of establishing and maintaining the home choice loan scheme to date; and the projected costs for the remainder of 2009 and 2010. [25112/09]

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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I propose to take Questions Nos. 27, 56 and 60 together.

Over 1,400 prospective purchasers have formally registered interest on the dedicated home choice loan website and, to date, 33 applications have been made, with two approvals issued in principle. A significant number of inquiries have also been received from brokers in relation to applications that may be pending. No loan draw downs have yet taken place.

The home choice loan was introduced not to provide an incentive for households to enter the housing market, but to provide mortgage finance to facilitate certain first-time buyers who have decided to purchase a home at this time. The scheme is, therefore, designed to respond, in a very targeted way, to a specific set of circumstances in the housing market whereby prospective middle income first-time buyers who would previously have been in a position to access mortgage finance from one of the financial institutions, are not currently in a position to do so, due to the impacts of the credit crunch.

The scheme is operated by four local authorities acting on a regional basis, with administrative support from a central processing unit in the affordable homes partnership. Total costs of some €280,000 have been incurred on establishing the scheme to date and these have been met from within existing resources. The projected costs for the remainder of 2009 and 2010 are €10,000 and €20,000, respectively. In addition, it is expected that the ongoing administrative costs will be met from normal lending margins.

The home choice taken applies to new houses and self-builds because a significant majority of first time buyers purchase new houses. At the time of introduction of the scheme the average new house price was almost 14% lower than the average second-hand house price, so it was considered appropriate to target the scheme towards properties which are more affordable for first-time buyers. The price differential between new and second-hand houses nationally remains significant, at 13%. I do not, therefore, propose to amend the terms of the scheme at this time.

However, as indicated previously, I will keep the scheme under review. In that context, particular attention will be paid to any changes in purchasing tendencies amongst first-time buyers generally, as well as to the impacts of the Government's wider efforts, through measures such as the bank guarantee and recapitalisation schemes, to ensure that Irish financial institutions have access to the normal funding necessary to operate their day-to-day business in the mortgage market.

Terence Flanagan (Dublin North East, Fine Gael)
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I thank the Minister of State for his response. The statistics he has given paint a damning picture of this scheme. There were 33 applicants, two approvals and no loans have been drawn down yet. In light of that, would the Minister of State review the effectiveness of this scheme?

The Fine Gael Party opposed this scheme during its introduction stating it would trap people in negative equity and encourage them to borrow up to seven times their salary. In light of the statistics he has given, can he review this scheme? Clearly, it is not working. It was targeted specifically at first homes. Would he now include second-hand homes in its remit?

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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There are a couple of matters that are not true in what the Deputy said. First, there is no question of people borrowing seven times their income.

Terence Flanagan (Dublin North East, Fine Gael)
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Up to seven.

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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It is actually five.

I have consistently stated that the home choice loan scheme was designed to respond to the needs of those households that wish to become home owners at present but who are unable to do so because of the credit crunch. It is there, not with any incentive or inducement.

We are not yet in a position to state that the home choice loan is not being drawn down for reasons that may not be altogether apparent, namely that it may be a spur to the financial institutions to give loans knowing that this alternative exists or that people are not entering the purchase market at this time. There are a number of reasons.

I had said all along that it is a temporary measure. I will keep it under review. It is there as an alternative facility for people who cannot get a mortgage in the normal situation. I am not in a position to withdraw it or to change it at this time, but it will be kept under review.

I also reject that there is any question of the Government putting people into the sub-prime market. This is totally incorrect. In fact, there is no incentive at all in the scheme, which is based on a variable rate. It is for people who have already made a decision to buy a house and who, for one reason or another, cannot get a mortgage due to the credit crunch. It is for the middle-income families above those who are on the social or affordable housing level. It is for people who are on an income of €40,000 as an individual and €50,000 as a couple, and the maximum loan is €285,000.

People make their own decisions on this. As I stated, there is no incentive or inducement. If that were the case, then I could stand accused. Indeed, another accusation made was that I was attempting to bail out developers. Deputy Flanagan did not make that but others have. I certainly reject there being any question of this putting people into the sub-prime area. That has not happened.

Ciarán Lynch (Cork South Central, Labour)
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As I understand it, there have been two purchasers under the scheme. Is that correct?

Terence Flanagan (Dublin North East, Fine Gael)
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No purchasers.

Ciarán Lynch (Cork South Central, Labour)
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I was not too sure. I could not believe my ears when I heard it. There have been no purchasers. The State has spent approximately €300,000, there are four local authorities involved in the scheme and there is no purchaser. What is going on here? At best, when this scheme was introduced the Minister of State could have been accused, if not of bailing out developers, of at least putting a false floor on the housing market so that properties would not fall below it by bringing in the €285,000 maximum loan. That is the most benign accusation that could be made against the Minister of State in this regard.

I note that in response to the question by Deputy Upton, who specifically asked for the cost of administration of the scheme to date, in excess of a quarter of a million has been spent on a scheme which is out of date, which does not reflect the current market, in which there are four local authorities tied up and in which there are no purchases proceeding. Will the Minister of State scrap this scheme and stop the excessive waste of public money in today's economic climate on what is a failed and flawed project?

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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I assure the Deputy that 1,400 prospective purchasers have formally registered interest, 33 formal applications have been made and two approvals have been made in principle. I have no intention of denying those people an opportunity if they want to build or buy a house for themselves. The scheme is there to facilitate them.

The start-up costs are those incurred by people who are already working for the Affordable Homes Partnership. The start-up costs were the largest part of the €280,000. Remember that such a facility is now used for the processing of loans throughout the local authority system. In many ways, it is money well spent.

Terence Flanagan (Dublin North East, Fine Gael)
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It is obvious that the scheme is not working and the Minister of State clearly needs to review it or scrap it.

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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As I stated, this scheme is a temporary measure. It will be kept constantly under review. A number of people have shown an interest and have gone through formal applications, and it would be inappropriate to deny them the opportunity we presented in this scheme.

Deputies should remember that there are two other aspects to this. The existence of this facility may have spurred financial institutions to give out loans where they might not have done so in the past. In addition, since September the recapitalisation of the banking institutions was proposed and implemented and these banks are providing loans as well.

Also, the sentiment in the market may say that people are not purchasing. There is no great information available to us that people are purchasing houses at present. While 1,400 have already registered an interest, they may be waiting, like others who have been going through the financial institutions, to see whether we have reached the floor in terms of house prices. There are a number of factors at play here.

Ciarán Lynch (Cork South Central, Labour)
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The figures in terms of this scheme involve four local authorities, expenditure in excess of €0.25 million, 1,000 people expressing an interest, 33 of whom wanted to have another look and two who decided that they might go for approval. A marketing firm would not market a product on the basis of those figures? What are we talking about here? One thousandth of those who come across the scheme are interested in it or are gullible enough to buy into it.

The sums, the percentages and the marketing figures all show that this is a flawed product. It is time to scrap it. Will the Minister of State, in the context of the next budget, state that this is money badly spent, accept that we are in a hole, put down the shovel and let us get out?

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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I can understand why 1,400 people would be curious about a scheme where there is the possibility of obtaining loan approval if they wish to purchase a house. That is the way it works in the real world, with loan approval being issued up to a certain figure to allow candidates to participate in a scheme. I ask the Minister of State to examine other ways of meeting the same objective, perhaps by looking again at the shared ownership schemes operated by the local authorities. I understand the limit in respect of local authority loan approvals was recently increased to €220,000. Will the Minister of State consider whether it can be increased further? Essentially, the home choice loan scheme is a publicity stunt and it is not working.

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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The Housing (Miscellaneous Provisions) Bill 2008 provides for a total revamp of all loans under the shared ownership, affordable and other schemes. Specifically, I have introduced two new types of loan, namely, the incremental purchase scheme and the equity loan. These measures represent significant movement in this area. The home choice loan scheme is essentially a facility for people who wish to build a house but are unable to access finance in the current economic climate. The website received 6,000 or 7,000 hits, with 1,400 people expressing a direct interest. There have been 33 formal applications. I am anxious that those applications be followed through so that people in this category are looked after. As I said, the loan facility is under review. It will be removed only when it is no longer necessary.