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Waverley Borough Council Committee System - Committee Document

Meeting of the Executive held on 30/09/2003
VARIABLE INTEREST MORTGAGES - VARIATION OF
MORTGAGE INTEREST RATE



Summary & Purpose
The purpose of this report is to seek the Executive’s approval to the ‘local average rate’ for the period 1st October 2003 to 31st March 2004 and to confirm the rate of interest chargeable on variable interest rate mortgages granted by the Council.

Quality of Life Implications
Natural Resource Use
Pollution Prevention and Control
Biodiversity and Nature
Local Environment
Social Inclusion
Safe Communities
Local Economy
Natural
Resource Use
Pollution
Prevention and Control
Biodiversity
and Nature
Local
Environment
Social
Inclusion
Safe, Healthy
and Active
Communities
Local
Economy
N/A
N/A
N/A
N/A
N/A
N/A
Positive



E-Government implications:

There are no E-Government implications.

Resource and legal implications:

This report has no new financial or legal implications.
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Introduction

1. Variable interest rate mortgages granted in the past by the Council fall under two different Housing Acts. Under both schemes, it is necessary to calculate, on a six-monthly basis, the ‘local average rate’. The rate is fixed at 0.25% over the Council’s loans pool rate calculated in accordance with ‘proper practices’ as defined in Section 66(4) of the Local Government and Housing Act 1989.

2. Since the Council has become debt free there is no longer a need to calculate a loans pool rate of interest for borrowing purposes. Interest rates for varying investment periods are currently ranged around 3.5 % and a notional loans pool rate calculated for the financial year to date is 3.51%. In addition, a cut in the base lending rate has reduced that rate to 3.5% with effect from 10th July 2003. It is therefore suggested that the ‘local average rate’ should equate to the bank base lending rate plus 0.25% i.e.3.75% p.a.
Housing (Financial Provisions) Act 1958 (Section 43)

3. The interest rate chargeable on mortgages pursuant to the above Act is determined by the Council. It is considered that the interest rate chargeable for the period 1st October 2003 to 31st March 2004 should be in line with the ‘local average rate’ of 3.75% p.a. This rate applies to 9 mortgages.

Housing Act 1985 (Schedule 16)

4. The interest rate chargeable on Council mortgages pursuant to the above Act should be set at the higher of either the Council’s ‘local average rate’ of 3.75% p.a. or the ‘standard national rate’ which is periodically set by the Office of the Deputy Prime Minister (ODPM) and was last set at 5.19% p.a. with effect from 1st January 2002. Therefore, the interest rate to be charged on these mortgages should be the ‘standard national rate’ of 5.19% p.a. for the period 1st October 2003 to 31st March 2004. This rate applies to 29 mortgages.

Recommendation

It is therefore recommended that:
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Background Papers (DoF)

There are no background papers (as defined by Section 100D(5) of the Local Government Act 1972) relating to this report.
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CONTACT OFFICER:

Name: Ms G Pope Telephone: 01483 523252 Comms/exec/2003-04/271