Ciarán Lynch (Cork South Central, Labour)
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Question 1044: To ask the Minister for the Environment, Heritage and Local Government his views on whether it is desirable that interest rate reductions be immediately passed on to local authority mortgage holders; and if he will make a statement on the matter. [2490/09]

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 1105: To ask the Minister for the Environment, Heritage and Local Government, further to Parliamentary Question No. 191 of 10 December 2008, if and when the European Central Bank interest rate cut of 0.75%, announced on 4 December 2008, will be passed on in full to local authority mortgage holders; if a decision has been made on whether the rate cut of 0.5% announced on 15 January 2009 will be passed on in full to local authority mortgage holders; and if he will make a statement on the matter. [1968/09]

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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I propose to take Questions Nos. 1044 and 1105 together.

In general, following consideration by the Board, the rates charged to local authority borrowers are normally adjusted by the Board of the Housing Finance Agency (HFA) in line with movements in European Central Bank (ECB) rates. The Agency recently notified local authorities of its decision to pass on, in full, the 0.75% decrease announced by the ECB in December. The effective rate for local authority borrowers from 1 February 2009 will therefore be 3.5% — a cumulative rate decrease since October 2008 of 1.75%. With regard to the most recent announcement of a further 0.5% cut by the ECB, the Agency, in responding to any movements in ECB rates, must give careful consideration, on each occasion, to the fluctuating relationship between its lending rates and the cost of funds, 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.

While it is hoped that it will be possible to pass on the most recent rate reduction announced by the ECB, as with previous rate reductions, it will be necessary to monitor the impact of the cut on interbank rates before a decision can be made. I anticipate that, in common with the situation following the previous cuts which are being passed on in full to local authority borrowers, the position in relation to possible movement in the HFA's lending rates should be clear within a number of weeks.