Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 61: To ask the Minister for the Environment, Heritage and Local Government if he will provide details of the recent meetings of the board of the Housing Finance Agency; if it will pass on the European Central Bank Interest rate cut of 25% to local authority mortgage holders; and the responses it has to ECB rate changes. [25105/09]

Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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In general, following consideration by the Board of the Housing Finance Agency (HFA), the rates charged to local authority borrowers are normally adjusted 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.

While with other recent rate changes, interbank rates have eventually mirrored ECB movements allowing the Agency to pass on rate cuts while continuing to operate on a break-even basis, in the case of the most recent ECB rate cut of 0.25%, the required fall in the interbank rate has not materialised. This means that the Agency's cost of funds has not fallen sufficiently to allow the most recent ECB cut to be passed on to borrowers.

However, it should be noted in the meantime that local authority borrowers have benefited from a cumulative rate decrease since October 2008 of 3% and that rates charged to local authority borrowers offer exceptional value by comparison to rates charged by commercial lenders, with the local authority rate currently running at over 0.85% lower than the market average variable rate. Historically, this differential has been narrower, with the rate charged to local authority borrowers more typically running at around 0.5% lower than the market average.