Building Societies Association (Hansard, 20 April 1977)

§ 16. Mr. Rooker
asked the Secretary of State for the Environment if he has any plans to meet the Council of the Building Societies Association.

§ Mr. Shore
My Department is in continuing contact with the Building Societies Association, and I hope to see its chairman shortly.

§ Mr. Rooker
Will my right hon. Friend request the Building Societies Association to explain better to savers in building societies and to those who have mortgages why building societies need to accumulate such large surpluses, which seem to the ordinary citizen to be spent 191 on strings of offices in High Streets? There seems to be no reason why this money could not be channelled into extra mortgages.

§ Mr. Shore
There has been a longstanding criticism of the number of building societies, but this is not the right occasion on which to debate that. On the broader question of surpluses, there is a balance to be struck. We have all been anxious to avoid the sort of famine in money for lending on mortgages that occurred in 1973–74, and to do so it is necessary for building societies to have a cushion of reserves. Otherwise their ability to lend will be seriously impaired and may be subject to wild variations of the sort that we had in 1973–74.

§ Mr. McCrindle
Have the Government not been bringing disproportionate political pressure on building societies to reduce interest rates? If they desist from the stampede against the societies until the level of inflow of funds becomes clearer, is it not likely that the rate of lending to mortgagees will settle down and that we shall avoid the ups and downs of rates that we have seen in recent years?

§ Mr. Shore
That is a strange comment. I am not aware of any political pressure. I am aware and I am glad that we have continuing contact with the building societies. The purport of the hon. Gentleman's remarks seems to be that he believes that the recent reduction in mortgage interest rates was either premature or too large, and I do not necessarily share that view.
There is a balance to be struck. We are all in favour of low mortgage interest rates—that wish is shared throughout the county—but we do not want to pay the price of violent swings in the availability of mortgages or have famines of the sort I described earlier.

§ Mr. Frank Allaun
Is my right hon. Friend aware how reluctant many building societies are to lend on older and cheaper properties? Is he aware that in Salford, six of the nine leading building societies insisted on houses having front and back gardens and possessing—

§ Mr. Speaker
Order. I have been very tolerant so far in allowing hon. Members to give information, and the House 192 can see how slowly we are going. If the hon. Member for Salford, East (Mr. Allaun) will put his remarks in the form of a question I shall be able to call more hon. Members in the next seven minutes.

§ Mr. Allaun
I have asked my question, Mr. Speaker.

§ Mr. Shore
My hon. Friend has drawn attention, not for the first time, to the reluctance of societies in certain areas to lend on older properties—the red lining problem to which reference has frequently been made in the House. I am aware of the problem. We have a new relationship with building societies and I intend to take up this matter with them, not just in the general sense, but in terms of monitoring progress and taking account of evidence of specific acts of red lining so that I can take them up with the societies.

§ Mr. Tebbit
Is the right hon. Gentleman aware that his remarks have a different tone from those of the Prime Minister on this subject yesterday? Is he also aware that although we all want lower mortgage rates—especially those of us with mortgages—we welcome what he has said rather more than we welcomed the tone of the Prime Minister's remarks?

§ Mr. Shore
I should not wish to be described as tone deaf, but I was not aware of any marked difference of emphasis between what the Prime Minister said and what I have said. As always, we are in perfect harmony.

§ Mr. Ioan Evans
Does my right hon. Friend agree that even if there is a change in plan there should be no change in emphasis, and that we hope that building societies will bring down their rates to borrowers? Is it not disturbing that when the minimum lending rate has been reduced by 6 per cent. the building societies' rates to borrowers have been reduced by only 1 per cent.? Is he aware that the Government have a right to ask the societies to look at this again in the near future and to bring down rates further?

§ Mr. Shore
I am sure that a lowering of the mortgage lending rate is the wish of the whole country and it is also the wish of the building societies to adjust their rates as soon as they can, consistent with 193 the major problems to which I referred earlier.

§ Mr. Arthur Jones
Is the right hon. Gentleman aware that the level of interest rates chargeable by the building societies essentially depends on Government policy? In the context of the repeated rise and fall of interest rates in the last 12 months and the cost to building societies of such changes, what criteria would the right hon. Gentleman use in giving advice to the societies?

§ Mr. Shore
This is inevitably a matter of judgment, which refers to two matters. First, there is the view that one takes of the structure of competitive interest rates for any period ahead. This has been particularly difficult to judge in the past year. Secondly, there is the inflow of money to the societies. We all have an interest in seeing that sufficient money comes in so that building societies are able to lend on the scale and with the consistency that the building industry requires.