Written answers
Wednesday, 24 November 2010
Department of Environment, Heritage and Local Government
Local Authority Housing
9:00 pm
Catherine Byrne (Dublin South Central, Fine Gael)
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Question 121: To ask the Minister for the Environment, Heritage and Local Government the reason the interest rate for local authority mortgage holders has been increased by 0.5%; the person who made the decision to increase this rate; his views on whether this decision should be reversed in view of recent data showing that local authority mortgage holders are six times more likely than bank mortgage holders to be in arrears; and if he will make a statement on the matter. [44198/10]
Michael Finneran (Roscommon-South Leitrim, Fianna Fail)
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Interest rates charged to local authority borrowers are determined by the Board of the Housing Finance Agency (HFA). In determining these rates, the Board of the Agency gives careful consideration to the fluctuating relationship between the rates at which it can borrow and its lending rates. The HFA is required to operate on a break-even basis and continues to provide extremely good value to local authority customers. However, the unavoidable increases in the Agency's borrowing costs required the rate charged to local authority borrowers to increase by 0.5% as of 1 November 2010.
I am acutely conscious of the fact that a considerable number of local authority borrowers are already facing difficulties in meeting their mortgage payments. However, local authority borrowers have benefited from very significant easing of mortgage costs in recent times. The effective rate for local authority borrowers from 1 June 2009 has been 2.25% - a cumulative rate decrease since October 2008 of 3%. This has resulted in a differential of over 1% between the rate charged to local authority borrowers and the average variable rate available from private lending institutions. Even allowing for the increase of 0.5%, that differential will be around 0.6%.
Where any borrower, either from a local authority or from a private financial institution, is facing difficulties in meeting mortgage repayments, they should engage proactively and constructively with the lender to seek to achieve an agreed solution. The services of the Money Advice and Budgetary Service are also available to such borrowers and support is available through the Supplementary Welfare Allowance Scheme.
In addition, I issued comprehensive guidance earlier this year based on the Regulators Code of Practice, to ensure that cases of local authority mortgage arrears are handled in a manner that is sympathetic to the needs of the particular household, while also protecting the position of the local authority concerned.
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