The differential between the rate charged to local authority borrowers and the average variable rate in the market has now grown out to around 1.75% - well in excess of the average historic average (0.5%).
The interest rate on local authority housing loans is determined by the Agency by reference to its cost of funds, which is determined by rates prevailing in the financial markets.
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Allied to this good news for local authority mortgage holders, is the announcement that in negotiating a renewal of the Mortgage Protection Insurance Scheme, a substantial reduction in the new rate to be applied has been achieved. In the case of the main scheme, which affects the majority of mortgagees, the rate has been reduced by 19.40%. In the case of shared equity loans, the combined rate has also fallen considerably by 10.68%. These improved rates have been achieved by subjecting the process to a vigorous tendering regime and harnessing the downward pressures in the market at present.
These rates will be applied for a 5 year period, in order to bring certainty and stability in turbulent financial times, starting on 1st January 2012.
Minister Hogan said that he hoped "the reduction in the interest rate and in the amount payable for mortgage protection insurance would go some way to alleviate the financial pressures faced by local authority borrowers in these straitened times".
Minister Hogan also welcomed the swiftness of the decision by the Agency to pass on this reduction and hoped that by doing so it would encourage all commercial lenders to pass on the reduction in the variable rate.
(CD/GK)
