Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
Link to this: Individually | In context

Question 893: To ask the Minister for the Environment, Heritage and Local Government if the European Central Bank interest rate cut of 0.5%, announced on 5 March 2009, will be passed on in full to local authority mortgage holders. [12235/09]

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

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 notified local authorities last month of its decision to pass on, in full, the 0.5% decrease announced by the ECB in January. The effective rate for local authority borrowers from 1 March 2009 is 3% — a cumulative rate decrease since October 2008 of 2.25%.

With regard to the most recent announcement of a further 0.5% cut by the ECB on 5 March, 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 inter-bank rates (i.e. the rates at which the Agency itself borrows) has been atypical and volatile in recent months.

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 closely to monitor the impact of the cut on inter-bank 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.