MORTGAGES (LOW INCOME EARNERS) (Hansard, 11 November 1975)

§ Mr. Frank Allaun (Salford, East)

I beg to move, That leave be given to bring in a Bill to require building societies to lend 10 per cent. of their advances annually to local authorities for providing mortgages to applicants unable to obtain them from building societies. As part of their economic cuts, the Government have recently required local authorities to reduce the amount they lend to would-be house buyers to half of the £520 million they lent in the previous financial year. As a result many councils are now having to turn down every application for a mortgage, however desperate for a home the family might be. When I applied to my own council at Salford, I was told that it had already had to refuse 135 applicants during the month.

Local authorities grant mortgages to people who have failed to obtain them from building societies, whether because the house involved is too old, the home-seeker is on a low income or he cannot afford a deposit. Councils, however, frequently grant 100 per cent. loans for house purchase. At the same time, the building societies are bursting with funds.

After discussions with the Department of the Environment, the 10 largest building societies agreed to lend £100 million to families who would not normally be favourably considered. This may sound a large sum, but compared with the £4,000 million a year that the building societies are now lending it is peanuts—about one-fortieth of the total. It is a modest request, therefore, that they should be required to provide four times the amount they agreed to lend—that is, £400 million a year—to help the less-well-off section of the community.

1143 Under my Bill, the money would be provided by the societies to the councils, which in turn would grant the mortgages, rather than their being granted directly through the building societies. We could then be more certain that the mortgages were being granted in the required total quantity and to those most needing them. It is obvious that far more low-priced homes could be bought than if an equal total of mortgage money were devoted to financing the purchase of luxury mansions.

The building societies are under some moral obligation to assist in this way since it was not so long ago that the Government lent them £500 million to keep their lending rates down to 11 per cent. This would give a great boost to the whole building industry, which is now in a serious slump with nearly 200,000 workers unemployed in the building and related trades. There are many owners of poorer types of house who wish to buy better houses but cannot do so until they have got rid of their existing homes. If more mortgages were available for the purchase of the poorer types of house, the sellers would be able to buy the better homes they seek. This would have an effect which would be felt throughout housing. It would help to kill two birds—homelessness and unemployment—with one stone.

The Bill would also require the societies to lend the money to the councils at reasonable interest rates, at not more than their current lending rates. Why should councils have to borrow, as they do, at 14 per cent. or even 15 per cent., thus having to charge high rates to mortgagees, when building societies can borrow at lower rates and charge not more than 11 per cent.?

Another clause of the Bill would permit the Government to require building societies to grant more than 10 per cent. of their annual loans to local authorities if it is thought that they can well afford to do so, if the situation so required and if Parliament gave its permission by Order. No one would be involved in loss 1144 —not the Government, not the building societies and not the local authorities. As we say in Lancashire, "There's nowt so safe as houses". The houses themselves provide ample security should there be default in repaying the loans and interest. Indeed, there has been an infinitesimally small loss to the lending bodies.

As this is almost the end of the parliamentary Session, and since it is hardly likely that the Bill will become law this year, I intend to reintroduce it in the coming Session of Parliament.