Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 391: To ask the Minister for the Environment, Heritage and Local Government his plans to initiate legislation in order to allow flexibility for people who have fixed rate local authority housing loans to switch to an alternative product with lower interest rates; and if he will make a statement on the matter. [24641/09]

Dinny McGinley (Donegal South West, Fine Gael)
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Question 393: To ask the Minister for the Environment, Heritage and Local Government if his attention has been drawn to the fact that many mortgage holders with local authorities are being charged interest rates in excess of 10%; his views on amending regulations in order that such mortgage holders can avail of current interest rates; and if he will make a statement on the matter. [25253/09]

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 402: To ask the Minister for the Environment, Heritage and Local Government if his attention has been drawn to the fact that 242 customers of Donegal County Council are repaying housing loans at rates in excess of 10%, a rate higher than those charged by sub-prime lenders; and if he will make a statement on the matter. [24637/09]

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 403: To ask the Minister for the Environment, Heritage and Local Government the breakdown of the rates of mortgage interest being paid by the 973 mortgage holders who are customers of Donegal County Council; and if he will make a statement on the matter. [24638/09]

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 404: To ask the Minister for the Environment, Heritage and Local Government the regulations or law which prevent a local authority from having the facility to offer customers on high rates of interest the option to transfer a reduced rate product in line with current market interest rates. [24639/09]

Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 405: To ask the Minister for the Environment, Heritage and Local Government if members of his Department have met with officials from the Department of Finance on the issue of fixed rate local authority loans; and the details of these meetings. [24640/09]

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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I propose to take Questions Nos. 391, 393 and 402 to 405, inclusive, together.

The applicable interest rate paid by local authority borrowers on fixed rates is set by reference to prevailing fixed interest rates at the time of loan draw down. The rate for 5 year fixed term loans will be reduced from 5.5% to 4.4% as of 1 July, while the variable rate charged to borrowers is currently 2.25%. The loans in respect of which interest rates in excess of 10% apply were issued by local authorities prior to 1991 and reflect the long-term costs of the funds to the Housing Finance Agency (HFA) prevailing at the time these loans were advanced. Rates were fixed for the life of the loan (generally 25 – 30 years). The introduction of variable interest rates for local authority mortgages provided borrowers with increased flexibility and choice.

Borrowers with these long term fixed rate local authority mortgages, which are no longer available, are permitted to redeem such loans without any interest rate penalty and refinance 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.

Local authorities may allow borrowers with shorter 5-year fixed rate mortgages to redeem early, or convert to a variable rate within the fixed 5-year period. However, In line with practice in the private sector, the HFA requires that it must be compensated for any losses it may suffer through prepayment of or conversion from a fixed loan. Breakage costs incurred by the Agency will therefore be charged to local authorities, who, in turn will charge the borrowers wishing to redeem or convert. My Department will be issuing further guidance to local authorities on this issue in the coming days.