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GAZEITE
Correspondence
The Editor
September, 1983
Law Society Gazette,
Blackhall Place,
Dublin 7.
Dear Sir,
There are a number of points in your article on the
Housing Finance Agency in the July / August issue of the
Gazette
which require comment.
Regarding criticism of delays, I would like to confirm
that since the first loan was paid in August 1982 there has
been no delay in the disbursement of funds from the
Agency to local authorities, the requests for funds from
authorities in the majority of cases being met within a few
days of receipt.
Regarding your comments on the inherent risks for
borrowers arising from an interest rate based on inflation
I would like to make the following points:
I.
The example quoted in your article was published
by the Agency at a time when annual inflation was
running at over 15%. Since then there has been a
considerable fall in inflation and the annual rate up
to May, 1983, was 9.2%. This resulted in an interest
rate on H.F.A. loans in the first year of charge of
12.45% (9.2% plus 3.25%) which compared
favourably with the rates on local authority and
buildin~
society loans at 12.5% and 13%,
respectively. Because of the increase in the cost of
funds to the Agency the amount to be added to the
rate of inflation to determine the interest rate on
Agency loans issued on or after 1st July, 1983, will
be 4.25%. A table showing an example of a
repayment pattern on a loan of £20,000 is included
on the handout recently issued by the Agency.
2. You will note that the handout mentions that if a
borrower from the HFA opts to make repayments
of 18% of his previous year's income (the minimum
repayment payable by a borrower receiving a loan
of three times his previous year's income) he would
not benefit from appreciation in the value of the
house in the same way as a borrower with a conven–
tional mortgage if he decides to re-sell. However, it
is open to the borrower to pay more than the
minimum required up to the amount he would pay
on an annuity basis and have his capital debt
reduced in line with borrowers who have building
society loans. On this basis he may change house on
approximately the same terms as the borrower with
a loan from a building society and the benefit he
derives will depend on the housing market at the
time. HFA borrowers who can afford to do this but
who decide to make
th~
minimum payment
required only have the benefit of money for other
purposes in the early years of the mortgage. While
the ultimate decision on the amount he will repay
rests with the borrower it is suggested tht he should
be advised to give very serious consideration to the
advantages of paying more than the minimum
where he can afford to do so.
<?ne should note that the Agency scheme is geared
mamly to help those people who might not otherwise be
292
DECEMBER 1983
able .to do so to provide their own homes. There is no
requlr.ement that
~he
bO.rrower should have money on
depOSit for a definate penod before he is considered for a
loan and
~orrow.ers
who cannot undertake the burden of
comparatively high repayments in the early years of a
mortgage can opt for income related repayments. The
benefits of the scheme to those who, without it, might
ha~e
to look to the private rented sector for accommo–
dation ar.e considerable; as. for other applicants, the
scheme gives .them the chOice of providing their own
house or lookmg to the local authority for re-housing.
Yours faithfully,
John Carroll,
Managing Director.
Housi~g
Finance Agency,
Phoemx House,
27 Conyngham Road,
Dublin 8.
EDITORIAL NOTE: There is perhaps an air ofunrealism
about the suggestion that it is open to the Borrower to pay
more than the minimum required The HFA scheme
is
intended to cover those whose incomes are not sufficiently
high to enable them to qualify for Building Society
Mortgages.
The Editor,
Law Society Gazette,
Blackhall Place,
Dublin 7.
Dear Sir,
15th November, 1983
I refer to the recommendation of Joint Committee of
Building Societies/Law Society (issued as a supplement
to the
Gazette
of the Incorporated Law Society of Ireland.
September 1983, Vol. 77. No.7) wherein the Joint
Committee opined that there is no necessity to have a
deed made in pursuance of Section 14 of the F.H.P. Act,
1976, adjudged duly stamped.
This direction struck me as curious, in that in past
experience in cases where the "Section 14 exemption" was
invoked, when a deed was lodged for adjudication the
Revenue Commissioners reserved their right to judge
each case on its merits. For example, ifa large area ofland
was involved, then the Revenue would allow an
exemption from stamp duty for the family home and the
land "reasonably appurtenant thereto"; stamp duty
would then be levied on the remaining land at half the
normal rate (not
Ad
Valorem.asthe parties are husband
and wife). The Adjudication Office employed two criteria
in coming to their decision, i.e., (I) the value of the land
and (2) the amount of land involved.
I have raised the point with the Adjudication Office and
it has been confirmed that the position has in no way
altered so far as they are concerned.
Accordingly, the direction of the Joint Committee may
be slightly misleading in that practitioners may construe
the direction as an
imprimatur
to register all deeds
without adjudication (regardless of the amount of land
involved) made in pursuance of Section 14 where the
appropriate certificate is contained in the deed.
Yours faithfully,
Alan Synnot, B.C.L.,
35 Landscape Crescent,
Churchtown,
Dublin 14.