Penrose says house repossessions for local authority borrowers 'last resort'

HOUSE REPOSSESSIONS for local authority borrowers were rare at only 128 instances between 2005 and 2010, Minister of State for the Environment Willie Penrose told the Dáil.

“Clearly, where repossessions do occur, it is only as a last resort, and my department is aware that it generally involves those households in arrears who refuse to engage with the local authority lender,” he said.

Mr Penrose said to date there was no evidence to suggest wider economic circumstances were creating problems specifically for local authority borrowers in meeting mortgage repayments.

Data published last February showed local authority mortgage arrears levels running at 15.08 per cent, a marginal increase on the 2008 level of 11.6 per cent, he added.

A total of 16.7 per cent of mortgage accounts in the private sector were now either in arrears for 90 days or more or had their mortgages restructured.

“This shows that despite local authorities’ role as lenders of last resort, generally providing loan finance to the lowest income home buyers, the level of mortgage distress is no worse than for other higher income categories of borrower,” Mr Penrose added.

Laois-Offaly Sinn Féin TD Brian Stanley said many people who acquired local authority loans now found themselves with no wage coming into the house and were also caught in a negative equity trap.

The problem was escalating, with household debt arrears accumulating at a major rate.

In Laois, 136 of 514 loans were currently in distress and in arrears for three or more months, he added.

In the shared ownership section, 33 per cent were in distress, indicating the seriousness of the problem.

“Families are under great pressure, which is affecting relationships,” said Mr Stanley.

He said burden-sharing and shared equity were options.

The local authority could take over ownership of houses in cases where the occupier was clearly not in a position in the short or medium term to pay off the loan, and then rent the house to the occupier.

“There could be interest-only repayments,” he added. “Payments could be deferred for a period or the period of the loan could be extended.”

Mr Penrose said local authority borrowers had received considerable protection from the worst effects of the downturn in terms of their borrowing costs.

The effective rate had come down by 2 percentage points since the end of November 2008 and now stood at just 3.25 per cent.