Peter Mathews (Dublin South, Fine Gael)
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Question 176: To ask the Minister for the Environment, Community and Local Government his plans to ensure that local authorities who are charging an interest rate of 12.5% under the income related housing purchase loan scheme are obliged to reschedule mortgages in distress at a lower interest rate; and if he will make a statement on the matter. [25447/11]

Peter Mathews (Dublin South, Fine Gael)
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Question 183: To ask the Minister for the Environment, Community and Local Government if he, or legislation, prevents local authorities from reducing the interest rate of 12.5% charged on income related housing purchase loan mortgages that are in distress; and if he will make a statement on the matter. [25448/11]

Willie Penrose (Longford-Westmeath, Labour)
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I propose to take Questions Nos. 176 and 183 together.

The fixed interest rates referred to reflect the cost of long-term funds prevailing at the time the loans were advanced and, like all fixed rate loans, are fixed for the life of the loan.

The costs of reducing the fixed rates on these loans would be substantial and would have to be borne by the Exchequer, the Housing Finance Agency or the relevant local authority.

It is important to note that borrowers on these particular fixed rate mortgages have been free, since 1980, 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.

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 Budgeting Service are also available to such borrowers and support is available through the Supplementary Welfare Allowance Scheme.

In addition, my Department issued comprehensive guidance to local authorities on the treatment of mortgage arrears in March 2010. That guidance was closely based on the Central Bank's first statutory Code of Conduct on Mortgage Arrears 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.

To reflect the content of the Central Bank's revised Code of Conduct – which replaced the previous code from 1 January 2011 and was informed by the deliberations of the Expert Group on Mortgage Arrears and Personal Debt – my Department is currently preparing updated guidance to local authorities in consultation with the City and County Managers Association.