THOUSANDS of hard-pressed people availing of a government scheme to buy their homes face an anxious wait to see if the State passes on the latest interest rate cut.
The European Central Bank lowered interest rates by a quarter of a percentage point on April 2. That should have meant a reduction in repayments for those on the Shared Ownership Scheme, the system whereby local authorities assist people who cannot afford to buy a house on their own.
But the Housing Finance Agency, the State-owned company that lends money to local authorities for this purpose and decides the interest rates, has not yet passed on the cut.
And the Government says it could be “a number of weeks” before the agency makes a decision.
The issue was raised by Sinn Féin TD Caoimhghín Ó Caoláin, who called on the Housing Finance Agency to pass on the interest rate cut in full.
Not to do so would be “another slap in the face” to low-income earners already hit hard by this week’s emergency budget, he said.
But in response, Housing Minister Michael Finneran indicated that just because the ECB had reduced rates, it didn’t necessarily mean the agency was obtaining finance more cheaply on the money markets.
“Given that the correlation between ECB rates and interbank rates [ie, the rates at which the agency itself borrows] is atypical and volatile at present, the agency, in responding to movements in ECB rates, must give careful consideration on each occasion to the fluctuating relationship between its lending rates and the cost of funds,” said Mr Finneran.
He stressed that the agency had passed on the previous ECB interest cut of half a percentage point announced at the start of March and that the agency’s rates had fallen by 2.5% overall since last October. But a decision on the ECB’s April cut would have to wait, he added.
“While it is hoped that it will be possible to pass on the further 0.25% cut announced by the ECB on April 2, as with previous rate reductions, it will be necessary to closely monitor the impact of the cut on interbank rates before a decision can be made,” said Mr Finneran.
“The position in relation to possible movement in the HFA’s lending rates should be clear within a number of weeks.”
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