Doherty hits out at exorbitant interests rates being charged by local authorities
Sinn Féin Senator Pearse Doherty has called on the Minister for the Environment, Heritage and Local Government to introduce legislation to allow local authorities to charge customers the current variable mortgage interest rate of 2.25%. Senator Doherty said he is aware of many families who are currently being paid over 10% interest on their mortgages to their local authority. He said it is unacceptable in the current economic circumstances for an arm of the state to be charging exorbitant interest rates to homeowners.
Senator Doherty said, “A total of 973 individuals and families have loans from Donegal county council and 242 of them are being charged interest in excess of 10%. All of the latter were taken out prior to 1991 when customers were obliged to take on a loan with a fixed interest rate for a period of between 25 to 30 years. This is one example: €17,000 borrowed, €32,000 repaid and still there is €10,000 left to repay. That means the customer of Donegal County Council in question will pay well in excess of 100% of what he or she originally borrowed.
“I am sure this problem is not exclusive to Donegal and that it applies across the State. There are probably many hundreds if not thousands of people who are affected.
“As of 1 July next, local authorities will be in a position to charge interest to borrowers at the current variable rate of 2.25%. As a result, there is a need to consider the cases of people who are paying exorbitant interest rates as a result of being forced to enter into fixed rate arrangements.
“Many people are angry at the banks other financial institutions for not passing on interest rate reductions from the European Central Bank. In this instance, however, local authorities, which come under the direct authority of the Dáil and the Minister for the Environment, Heritage and Local Government, are charging customers high rates of interest. It is not acceptable that people are being charged exorbitant interest rates by an agency of the State.
“The Minister for the Environment, Heritage and Local Government has allowed customers of the local authority to remove themselves from the situation in which they find themselves if they are in a position to refinance their loans in the private, mainstream banking market. However, the difficulty is that to apply for such loans in the first instance, they had to have been refused loans by building societies or banks. The local authority scheme was their final option. Many of these people are social welfare recipients and are not in a position to pay back their loans.
“There is also the concern, which none of us would like to see this happen, that they may enter the sub-prime landing market and that an increased trend of house repossessions might result.
“Legislation must be brought forward to enable local authorities to allow their customers who are on high fixed interest rates to refinance with those authorities and avail of the variable rate of 2.25% on offer to customers who are applying for loans at present.” ENDS