Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 223: To ask the Minister for the Environment, Heritage and Local Government further to Parliamentary Question No. 53 of 8 April 2009, if a decision has been made to pass on in full the European Central Bank interest rate cut of 0.25%, announced on 2 April 2009, to local authority mortgage holders; when a decision will be reached on the 0.25% cut announced on 7 May 2009; and if he will make a statement on the matter. [19164/09]

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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I refer to the reply to Question No. 53 of 8 April 2009. In general, following consideration by the Board of the Housing Finance Agency (HFA) the rates charged to local authority borrowers are normally adjusted by the Board, in line with movements in European Central Bank (ECB) rates. 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.

As with previous rate reductions, it will be necessary closely to monitor the impact of the cut on interbank rates before a decision can be made in respect of the most recent ECB decision. I anticipate that, in common with the situation following the previous cuts which were 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.

The HFA notified local authorities last month of its decision to pass on, in full, the 0.25% decrease announced by the ECB on 2 April. The effective rate for local authority borrowers from 1 June 2009 is 2.25% - a cumulative rate decrease since October 2008 of 3%.