Fixed interest rates on Local Authority Home Loans have recently increased by up to 0.65 percentage points, leaving some borrowers unable to secure sufficient loans for homes they were in the process of purchasing.
The Local Authority Home Loan scheme assists first-time buyers who are unable to obtain mortgages from private lenders or banks due to low income.
According to the Department of Housing, the interest rates on new fixed-rate Local Authority Home Loan mortgages have increased starting from last Thursday. For mortgages up to 25 years, the interest rate has risen from 3.35% to 4%. For mortgages over 25 and up to 30 years, the interest rate has increased from 3.45% to 4.05%.
Existing Local Authority Home Loan mortgages are not affected by this rate increase.
Although the rate rises are significant, the Department of Housing claims that the rates are competitive in comparison to long-term fixed rates offered by other commercial lenders.
However, Michael Dowling, a leading broker, expressed doubts about the department’s assertion of competitiveness after the rate increases. He argues that since the Local Authority Home Loan scheme is a government-backed initiative, the government should not be imposing higher mortgage interest rates compared to the only commercial bank offering similar fixed rates over 25 and 30 years, Avant Money, which offers rates as low as 3.95%.
Borrowers who learned of the rate hikes too late were unable to complete the necessary paperwork in time to qualify for the lower rates. Some borrowers have lost out on property purchases as a result, while others now face higher monthly payments. The lack of advanced notice and sufficient warning has caused frustration among potential borrowers.
When questioned about the rate increases, the Department of Housing explained that they were obliged to pass on the higher costs of funding due to market developments. To be eligible for a local authority mortgage, single applicants must have an annual gross income below €70,000, and joint applicants must have an annual gross income of less than €85,000.
It’s worth noting that local authority mortgages have a high rejection rate, with over half of mortgage applications to local authorities being rejected in the previous year, according to figures supplied to Sinn Féin TD Eoin Ó Broin by the Housing Agency.
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