HC Deb 03 April 1962 vol 657 cc188-9
9. Mr. Spriggs

asked the Chancellor of the Exchequer to what extent the changed Bank Rate has affected the cost of purchasing a house for owner occupation through building societies; and whether he will take powers to control mortgage interest rates for house purchase.

The Financial Secretary to the Treasury (Sir Edward Boyle)

No, Sir, since the rate of interest on mortgages must remain a matter for settlement between a society and its borrowers. There has been no change in the rate since the recent reductions in Bank Rate.

Mr. Spriggs

Is the hon. Gentleman aware that his answer means that interest rates have a higher priority than homes for the people? Does not he realise that if a would-be house purchaser borrows £2,500 for ten years the interest rates amount to £1,063, and that if he borrows it for fifteen years at the same figure he pays £1,625 in interest rates? In view of the large number of people waiting for homes, will not the hon. Gentleman consider the introduction of new legislation to control these interest rates?

Sir E. Boyle

My answer meant exactly what it said. The last part of the hon. Member's supplementary question shows very clearly that it would not make economic sense to isolate this part of the field and insulate it from the Government's general credit policy.

Sir C. Osborne

Why cannot we have a 4 per cent. Bank Rate to help the people who are trying to buy their houses?

Sir E. Boyle

It is always nice to hear my hon. Friend. That supplementary question ranges rather wider than the Question on the Order Paper.

Mr. Callaghan

Will the Economic Secretary ask the building societies why it is that they do not follow the general rule that what goes up must come down?

Sir E. Boyle

It may have escaped the hon. Member's notice that the Building Societies Association recommended, as long ago as 2nd June, 1961, that member societies should raise their rates—and that was well before the Bank Rate was raised. The rates charged on mortgages depend not so much on the prevailing Bank Rate as on interest rates in general. The fact that the demand for these mortgages is so high must have some effect on the interest rates. That is only economic sense.