Olivia Mitchell (Dublin South, Fine Gael)
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Question 514: To ask the Minister for the Environment, Heritage and Local Government if consideration will be given to writing off the outstanding amounts owed by low income families who financed mortgages with State-backed funds at fixed interest. [4548/05]

Olivia Mitchell (Dublin South, Fine Gael)
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Question 518: To ask the Minister for the Environment, Heritage and Local Government if he will consider writing off the outstanding amounts owed by low income families who financed mortgages with State-backed funds at fixed interest and who, although having made repayments over 30 years, still owe in some cases more than the amount borrowed despite that the State has rolled over the original loan which financed the scheme. [4621/05]

Noel Ahern (Dublin North West, Fianna Fail)
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I propose to take Questions Nos. 514 and 518 together.

Local authority mortgages are provided to eligible low income households, who would not otherwise obtain finance. The lending is provided on a self-financing basis.

The loans the question refers to were issued by local authorities prior to the introduction of variable rates in December 1987, and reflect the long-term costs of the funds prevailing at the time the loans were advanced. Rates were fixed for the life of the loan. The subsequent introduction of variable interest rates for local authority mortgages has provided borrowers with increased flexibility and choice.

Borrowers with fixed rate local authority repayments are permitted to redeem such loans without any interest rate penalty and re-finance them in the private sector. This represents a significant concession having regard to the redemption penalties of up to six months' interest or more applied by commercial lending agencies in the event of early redemption of such mortgages. In 2001, the position regarding high fixed interest rates on local authority loans was reviewed in consultation with the Department of Finance. This review determined that a State subsidy to reduce such interest rates would not be appropriate.