Pearse Doherty (Sinn Fein)

Cuirim fáilte roimh an Aire Stáit, an Teachta Haughey.

I wish to refer to the hundreds of customers of Donegal County Council who took out housing loans prior to 1991 and are paying fixed interest rates in excess of 10% on those loans. A total of 973 individuals and families have loans from the county council and 242 of them are being charged interest in excess of 10%. As already stated, all of the latter were taken out prior to 1991 when one was obliged to take on a loan with a fixed interest rate for a period of between 25 to 30 years. Some of those involved are only 19 years into the term of their loans and have a further ten or 11 years left to go.

As of 1 July next, local authorities will be in a position to charge interest to borrowers at the current variable rate of 2.25%. As a result, there is a need to consider the cases of the 242 people who are paying interest at a rate in excess of 10% and also the remaining 700. We know that the latter are not paying interest at a rate of 10% or more. However, we are not sure whether they are paying 7%, 8%, 9%, 9.5% or whatever. If they are paying interest at a rate that is above the current variable rate, then it is obvious they are paying too much.

Many Senators have been criticising the banks - I am sure the Minister of State feels the same sense of anger towards them - and other financial institutions for not passing on interest rate reductions. In this instance, however, a local authority which comes under the direct authority of the Dáil and the Minister for the Environment, Heritage and Local Government is charging customers in Donegal high rates of interest. It must be remembered that those to whom I refer could not obtain loans from the mainstream lending banks - one of the conditions people must satisfy before they can apply for local authority housing loans. It is not acceptable that they are being charged interest at a rate in excess of 10% by an agency of the State.

The Minister for the Environment, Heritage and Local Government has allowed customers of the local authority to remove themselves from the situation in which they find themselves if they are in a position to refinance their loans in the private, mainstream banking market. However, the difficulty is that to apply for such loans in the first instance, they had to have been refused loans by building societies or banks. The local authority scheme was their final option. Many of these people are social welfare recipients and are not in a position to pay back their loans. There is a concern - none of us would like to see this happen - that they may enter the sub-prime landing market and that an increased trend of house repossessions might result.

Legislation must be brought forward to enable local authorities to allow their customers who are on high fixed interest rates to refinance with those authorities and avail of the variable rate of 2.25% on offer to customers who are applying for loans at present. We must show compassion towards the people to whom I refer. I am sure this problem is not exclusive to Donegal and that it applies across the State. There are probably many hundreds if not thousands of people who are affected.

The Government last reviewed the issue of high fixed interest rates in 2001. At that stage, it decided that a State subsidy to reduce such interest rates would not be appropriate. In light of current events and concerns relating to sub-prime lenders, house repossessions, the economic downturn and the pressure being exerted on families, surely the Government cannot stand over an arm of the State charging some of its customers interest rates in excess of 10%. We do not know if the actual rate being charged is 12%, 15%, 18%, 19% or whatever and I would like the Minister for the Environment, Heritage and Local Government to provide details in this regard at a later date.