Local Authority Residential Mortgage Credit: A Source of Non-Market Sub-Prime Homeloans for Low-Income households
Irish Journal of Applied Social Studies. 2008;8(1):51-69
Journal Title: Irish Journal of Applied Social Studies
ISSN: 1393-7022 (Print); 2009-8642 (Online)
Publisher: Social Care Ireland
LCC Subject Category: Social Sciences: Social pathology. Social and public welfare. Criminology | Social Sciences: Social history and conditions. Social problems. Social reform
Country of publisher: Ireland
Language of fulltext: English
Full-text formats available: PDF
AUTHORS
Dermot Coates
EDITORIAL INFORMATION
Time From Submission to Publication: 26 weeks
Abstract | Full Text
As the volume of mortgage credit has risen in tandem with house price inflation, the sub-prime homeloan sector of this market has begun to expand in order to meet demand from those not serviced by the mainstream financial service providers. This article examines the role of local authorities in providing residential mortgages and assesses whether those who have traditionally borrowed from non-market (or public sector) lenders would be considered to be sub-prime borrowers by the private sector. It concludes that, in view of the relatively low average incomes of this cohort of borrowers, they represent a higher probability of homeloan default and as a consequence, would be subject to a higher cost of credit in the private sector. However, this paper highlights the favourable terms offered by local authorities and argues that their failure to price according to the risk profile of borrowers exposes the Exchequer to higher – and often unquantified – costs in pursuit of promoting home-ownership.