Building Societies (Hansard, 3 July 1974)

§ 3. Mr. Whitehead
asked the Secretary of State for the Environment what further communications he has received from the building societies relating to mortgage interest rates; and if he will make a statement.

5. Mr. Dixon
asked the Secretary of State for the Environment whether he will make a further statement about building societies.

§ 40. Mr. William Hamilton
asked the Secretary of State for the Environment if he will make a further statement on official financial assistance to the building societies, and its effect on mortgage interest rates.

§ Mr. Crosland
On 14th June the Building Socieities Association accepted the offer of the third tranche of £100 million under the Government's short-term loan scheme. As a result of this scheme, there has been no general increase in building society mortgage rates. The Government and the association are keeping in regular consultation on these matters.

§ Mr. Whitehead
After that welcome statement that the substantial capital inflow into the building societies continues, may I ask my right hon. Friend to confirm that there is no reason for an increase of even ½ per cent. in interest rate? Will he tell us how many societies have not taken up the Government's offer, how many of them have now increased their rates by ½ per cent., causing many complaints among our constituents, and what he proposes to do about the situation?

§ Mr. Crosland
On my hon. Friend's last point, a number of smaller societies which have not taken part in the scheme have increased their rates by a certain percentage, but these societies are in total responsible only for less than ½ per cent. of total building society lending. On the matter of the proposed ½ per cent. increase to cover the margin problem, I have this very much in mind and so have the building societies. I should, however, make my broad intention clear. We have frozen council and private rents for this year and I am determined that the owner-occupier should not pay a higher mortgage rate this year.

§ Mr. McCrindle
What progress is being made towards achieving a low-start mortgage scheme for first-time buyers? We welcome the discussions which the Government are now having with the Building Societies Association, but will the right hon. Gentleman confirm that the achievement of such a scheme is still within the aim of the Government?

§ Mr. Crosland
I know of the hon. Gentleman's long-standing interest in low-start mortgages. This is an extremely important matter which is on the agenda of our joint discussions with the building societies. It will form part of a longer-term review that we are conducting into how best to ensure a stable and adequate flow of mortgage finance on the most sensible terms.

§ Mr. Raphael Tuck
Has my right hon. Friend given further consideration to a 365 suggestion made a little while ago, that the banks should make available some of their huge profits for loans at reasonable rates to intending house owners?

§ Mr. Crosland
The huge profits of the banks are likely to be rather lower this year than last year, for a number of reasons. But we are, as part of our longer-term studies, considering the whole question of how and whether the building societies or mortgage lending as a whole should have access to institutional funds of one kind or another. This is not confined merely to the banks. We are also considering whether pension funds, insurance companies and the rest should make a contribution to the total amount to be made available for mortgage lending.

§ Mrs. Thatcher
Does one of the right hon. Gentleman's previous supplementary replies mean that the Government are prepared to leave the composite rate which the building societies pay as it is at present, and not increase it as a result of the Chancellor of the Exchequer's Budget Statement? Has the right hon. Gentleman made any request to the building societies that they should use part of the Government's loan money to finance new house building to avoid a situation which could otherwise occur in which, just as there is an upsurge in demand, there is a falling-off in house building?

§ Mr. Crosland
The right hon. Lady's first point is the same as that about reducing the operating margin, which the building societies claim was imposed on them by the increase in the composite rate of tax in the Budget. This matter is now under active discussion with the building societies and it will be discussed tomorrow at the next meeting of the joint advisory committee. With regard to the question of how to employ the short-term Government loan, we have not laid down detailed conditions. The whole object of the exercise is that this loan should be employed in a way which is best in terms of restoring desperately-needed confidence in the private house building industry.