HC Deb 29 November 1966 vol 737 cc199-200
24. Mr. St. John-Stevas

asked the Chancellor of the Exchequer whether he will make a statement of Government policy on mortgage interest rates chargeable by building societies.

59. Mr. Winnick

asked the Chancellor of the Exchequer what action he intends to take on the National Board for Prices and Incomes Report on the Building Societies.

Mr. Callaghan

I conveyed to the Building Societies Association on 14th November the Government's view that, in present circumstances, the 6¾ per cent. mortgage rate should be maintained, and I am proposing to them a study of the real requirements of reserves and liquidity.

Mr. St. John-Stevas

But is not that quite unrealistic advice to offer the build- ing societies, in view of the high level of interest rates created by the Government? Would not the best contribution which the Chancellor can make in the present situation be to honour his election pledge and revive the mortgage option scheme, which seems to have gone into permanent deep freeze?

Mr. Callaghan

The hon. Gentleman will be glad to hear that the mortgage option scheme legislation will be appearing before very long. On the first part of his question, interest rates are, of course, not a purely domestic matter; they have international repercussions. I am not able to say at the moment in what way world interest rates will be moving, but there is a general expectation, I think, that, over the next few months, they are more likely in the world as a whole to turn downwards than to move upwards.

Mr. Winnick

Is my right hon. Friend aware that owner-occupiers consider that there would be no justification for any increase in the mortgage interest rate? Would he not agree that the report shows that the reserves of the societies are large enough for no increase to be necessary for some considerable time?

Mr. Callaghan

The last part of that question refers to exactly what I should like to study with the building societies. This proposition was put to them many months ago. As a result of the discussion, I then referred it to the Prices and Incomes Board and so far, I think, the Board has accepted and reinforced my view that there is a real and serious subject for discussion here about what the proper level of reserves should be.

Mr. Lubbock

Is the right hon. Gentleman aware that, although the Building Societies Association may be considering the matter further in the light of the Report of the Prices and Incomes Board, some members of the Association are disregarding his advice and that the Lambeth Building Society, for example, has increased its rates to 74¾ per cent.?

Mr. Callaghan

There has never been, especially among some building societies, agreement to maintain a fixed rate, but the recommended rate is what we are talking about here. It is that rate on which I have commented.