Housing Corp. loans

Press, 17 June 1988, Page 12

Housing Corp. loans

Sir,—A recent article in “The Press” stated the Housing Corporation’s top rate for home mortgages was 17 per cent. On April 1, this was increased to 18.5 per cent for employees of State-owned enterprises who had received their loans as public servants on transfer. At a time of low inflation and falling interest rates no Government Minister has justified this increase, despite letters from myself and others.—Yours, etc., PAUL HAYWARD. May 20, 1988.

[The Minister of Housing, Ms Helen Clark, replies: "On June 1 I announced that the Housing Corporation had dropped its prime interest rate, for lending to people who qualify as modestincome, first home-seekers, from 17 per cent to 16.5 per cent. The prime rate is continually surveyed in the light of changes in private market rates. Loans to State servants on transfer are based on commercial rates. The loans have been fixed at 16 per cent since the start of the scheme. The difference between this and the market rate was met by the employing department by way of a subsidy plus an administration charge. During the corporatisation process the Government decided that State em-

ployees who had such loans at the time their Government department was changed to a Stateowned enterprise should be allowed to retain their interest concessions until April 1, 1988. After April 1 the non-subsidised market rates were to apply. It is a condition of loans made under the scheme that when the employee leaves the Public Service the interest rate is increased to the market rate. That condition was specifically set out in the loan offer of July 8, 1988. Those former State servants on transfer who had loans and who have since left the Public Service as part of the corporatisation process qualify for the new prime interest rate of 16.5 per cent. The Housing Corporation administers the State servants-on-transfer loans as an agent for the State Services Commission and the employing departments. The corporation does not determine the policy of the loans. This was agreed in negotiations between the Combined State Unions and the State Services Co-ordinating Committee.”]