Róisín Shortall (Dublin North West, Labour)
Link to this: Individually | In context

Question 220: To ask the Minister for the Environment, Heritage and Local Government the way the recent drop in mortgage interest rates will affect home owners who have opted for shared ownership and affordable housing local authority schemes; if local authority mortgage holders have been offered a similar reduction in interest rates; and if there is an onus on his Department to ensure that this reduction is passed on without further delay. [42974/08]

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
Link to this: Individually | In context

The interest rate on local authority housing loans is determined by the Housing Finance Agency (HFA) by reference to mortgage rates prevailing in the financial market. The current variable interest rate to local authority borrowers, excluding mortgage protection, is 5.25%. The current fixed interest rate available on local authority loans, excluding mortgage protection, is 5.5% for a period of 5 years.

At the October meeting of the Board of the HFA it was decided that the interest rate cut of 0.5% announced by the European Central Bank in October would be passed on in full to local authority borrowers. The new effective variable rate of 4.75%, which compares favourably with corresponding rates charged by commercial lending agencies, will take effect from 1 December. Following the further 0.5% reduction in ECB rate announced this month, the Agency has recently decided to further adjust rates to fully reflect the overall decrease. The effective rate for local authority borrowers from 1 January 2009 will therefore be 4.25%.

In general, following consideration by the Board, the Agency's rates are normally adjusted in line with movements in ECB. However, given that the correlation between ECB rates and interbank rates (i.e. the rates at which the Agency itself borrows) is atypical and volatile at present, the Agency in responding to movements in ECB rates, must give careful consideration, on each occasion, to the fluctuating relationship between its lending rates and the cost of funds.