HC Deb 11 March 1919 vol 113 cc1197-9

Nothing in the principal Act shall prevent an increase in the rate of interest payable in respect of the extended period on a mortgage to which the principal Act applies, if the increase does not exceed one-half per centum per annum, and the rate when so increased does not exceed five per centum per annum, and Sub-section (4) of Section one of the principal Act shall apply as if the reference therein to the standard rate included a reference to such increased rate.


I beg to move, at the end, to add the words Provided that this provision shall not authorise the raising of the rate of interest under existing mortgages where the principal is repayable by fixed instalments at yearly intervals, or less, so long as the principal and interest are regularly paid in accordance with the terms of the instrument. I am not sure whether this Amendment is necessary or whether it is already provided for by the Bill. The point of it is this. There are a number of cases in which tenants have purchased their houses through building societies, the vendors taking a mortgage, which is repayable by equal instalments until the whole of it is paid off. I think obviously, just as in the case of a lease for a long term of years, it would not be competent for a landlord to vary the term of that firm agreement where a mortgage of this kind is repayable over a term of years, so long as the conditions which have been agreed upon are fulfilled there is no intention that the mortgage should be able to raise the interest.

8.0 P.M.


I am afraid I do not see my way to accept the Amendment. Under the principal Act a special exception was inserted, enabling the mortgages of building societies to be called in, and any such Amendment as this would be very strongly resisted by the building societies. I do not know whether that consideration has been present to the mind of the hon. Member who moved this Amendment, but if he takes that into account I think he will see that on the whole the Government cannot accept this Amendment.


Has the right hon. Gentleman considered that in these cases the security is increasing in value proportionately to the amount of debt which is being steadily reduced? I can- not altogether accept the point which the right hon. Gentleman has put, but if he tells me that it is really contrary to general convenience, and that the whole matter was fully thrashed out on the principal Act I do not think I can press the Amendment


I want to make this point quite clear. Does the right hon. Gentleman mean to say that when a man buys a house out and out, and it is to be paid for by instalments and a mortgage is executed to secure these instalments at a certain rate of interest, say, 4 or 5 per cent., that the mortgagee is to be in a position to raise that rate of interest? This is not like money lent as security upon a house. It is quite a different transaction. It is a question of the out and out sale of a house, the purchase price payable by instalments secured by mortgage, say, at 4 or 5 per cent. Why should the mortgagee have more than that? I do not remember the question being discussed on the previous Bill, though I was present at the time the Bill was under discussion. I deny the right of building societies to dictate in this matter.


I do not think these mortgages would come under this new Act. Surely the only way of bringing that mortgage to an end is by demanding its being paid off, and there is no possibility of that. These are not ordinary mortgages but contracts for a certain definite term of years, and for a certain consideration so much is to be paid every year. I do not think that in the ordinary sense the rate of interest can be raised in these cases.


I am afraid that the answer to that is that all mortgages are covered by this Bill, and therefore the in crease which is given in the rate of mortgage interest equally covers these mortgages unless an exception is made. As I understand the position, from what the President of the Board of Education has said, naturally the building societies of the country will say, "Why should mortgages in respect of which we have entered into arrangements be treated in any different manner than the mortgages of any other person?" That is simply the position. It is not a question of dictation by the building societies, but it is a question of a new rate of interest having been laid down by the law of the country, and naturally it would be very disturbing for the building societies it they were treated in a different way from other people who have lent money on mortgage.


Speaking from memory I think the whole question was gone into from the building society point of view when the principal Act was passed in 1915, but I would suggest that between now and the Report stage the right hon. Gentleman should look up the matter and any point which arises might be dealt with. So far as my memory serves me I believe the whole thing was gone into and the difference between these periodic payments as part of capital was taken into consideration.


That was my impression. I think the whole thing was gone into. At the same time if the Committee desires me to do so I will give the matter further consideration, and if the Government thinks that it is necessary to meet the hon. Member in any other way on the Report stage we will do so.


I am much obliged, and I beg leave to withdraw the Amendment.




Does the hon. Member object to the Amendment being withdrawn?


I do object. Before the right hon. Gentleman makes a decision, I hope he will remember that this class of mortgage is totally different from the ordinary class of mortgage. In the ordinary class of mortgage you can call in your mortgage, but in the class of mortgage to which this Amendment refers you cannot call in the mortgage. Therefore, it seems to me to be unreasonable to increase the rate of interest.

Amendment, by leave, withdrawn.

Clause agreed to.