HOUSING (OPTION MORTGAGE SUBSIDY) (Hansard, 26 July 1977)

§ The Under-Secretary of State for the Environment (Mr. Ernest Armstrong)
I beg to move, That the draft Assistance for House Purchase and Improvement (Variation of Subsidy) Order 1977, which was laid before this House on 15th July, be approved. This draft order modifies the scale of option mortgage subsidy at present set out in Statutory Instrument 1975 No. 1240. The House will be aware that the option mortgage scheme is open to any house purchaser who chooses to receive assistance by means of an interest-related subsidy, equivalent to the help which would be available through tax relief at the basic rate on full mortgage interest. We estimate that at present about three-quarters of a million householders are buying their own homes with the help of an option mortgage.
On this occasion, as the Chancellor announced on 15th July, tax is being reduced from 35 per cent. to 34 per cent. With effect from 1st October 1977, the existing rates of subsidy will be reduced by 0.1 per cent. This will mean that equality of treatment will be preserved as between the option mortgagor and the mortgagor eligible for full tax relief at the new basic rate.
I am sure it is still the general wish of the House that the option mortgagor should be kept on the same footing as those who receive assistance through tax relief. It is to preserve this principle of comparability that this order has been introduced, and I hope the House will approve it.

§ Mr. Tim Sainsbury (Hove)
The Opposition accept that the option mortgagor, as the Minister said, should be kept on the same basis. It is an interesting commentary on the way that we describe things in the House that every time the subsidy is increased we introduce an "increase of subsidy" order, whereas if the subsidy is to be decreased we intro-duce a "variation of subsidy" order. I suggest that we should be a little more honest and call an increase an increase and a decrease a decrease.
470 The Minister estimates that three-quarters of a million householders are currently benefiting from the scheme. How many householders purchasing perhaps mainly for the first time would be likely to benefit from the scheme? I feel that the option mortgage scheme is generally insufficiently known amongst the public. What plans does the Minister have for increasing the publicity given to the availability of the scheme, which is very valuable particularly in helping first-time buyers, particularly young buyers, to get a first step on the ladder of home ownership?
Furthermore, will the Government now consider making it easier for people to enter the scheme by allowing the switch from option mortgages to regular mortgages at less than four years after the option mortgage is initially taken up? I am sure that the Minister will appreciate that, particularly in times of economic uncertainty—which seem to accompany the present Government—many first-time house buyers will be uncertain whether, over a period of as long as four years, the option mortgage will continue to be a benefit to them. It seems to me much more sensible to allow a switch after one year, as the Royal Institution of Chartered Surveyors has recommended, or perhaps after two or three years. Will the Minister indicate whether the Government are giving active consideration to varying that condition?

§ Mr. R. A. McCrindle (Brentwood and Ongar)
I should like the Minister to clarify one point. As I understand it, the incidence of option mortgages is particularly high amongst first-time buyers who, for the most part, wish to borrow the maximum percentage and obtain their repayment under what is called the annuity-type mortgage. It is normally only the more affluent type of borrower who wishes to repay on the endowment-type mortgage. The difference is that with an endowment mortgage there is tax relief not only on the interest content but on the capital repayment represented by the endowment premium.
Can the hon. Gentleman say in what circumstances it would be possible for an option mortgage to be tied to an endowment mortgage, in view of the fact that the number of first-time buyers who 471 could possibly take advantage of endowment mortgages must be small? If they are not paying sufficient tax, how can they get tax relief on the capital aspect represented by the endowment?

§ Mr. Armstrong
I take note of what the hon. Gentleman has said. I cannot give the information off the cuff, but I shall give him the full information as soon as I can.
I take the point that was made about publicity. I welcome the interest of the hon. Member for Hove (Mr. Sainsbury) in this matter. We receive various submissions from time to time about switching in. People can switch in after one year, and switch out after four years, but I cannot give a definite commitment on behalf of the Government.
I thought that the scheme was fairly widely known, but I take note of what the hon. Gentleman said about publicity.
I respect what the hon. Gentleman said about anxiety with regard to the change in the subsidy. We shall write to the authorities concerned, to the lenders, local authorities, building societies, and so on, within 10 days so that they can in good time notify those who are in the scheme. I take the point about extending the scheme and about publicity. This is always a difficult matter, and I shall be in touch with the hon. Gentleman.

§ Mr. McCrindle
I apologise for pressing this further, but the House is being asked to approve an order which, in the explanatory note, refers to endowment mortgages. If, as I contend, it is almost impossible—

§ Mr. Deputy Speaker(Sir Myer Galpern)
Order. The hon. Member 472 has already taken part in the debate. In an effort to be helpful, may I ask whether he is raising a point of order?

§ Mr. McCrindle
I was not seeking to raise a point of order, Mr. Deputy Speaker. I was proposing, with the permission of the House, to ask how we could possibly support this order when the Minister is unable to answer when I raise a point on the wording of the order.

§ Mr. Deputy Speaker
I am sorry, but even if the Chair knew the answer it would not be permitted to give it. Has the Minister anything further to say?

§ Mr. Armstrong
I appreciate the point that has been raised. We cannot give an estimate of take-up, but I do not think that that is relevant to the order, the purpose of which is to bring the option mortgage into line with the decrease in the income tax rate for the purpose of tax relief, and so on.

§ Mr. Sainsbury
I wonder whether, to help the House and to further our consideration of the order, the Minister would write to my hon. Friend and myself indicating how many of the option mortgages in existence were granted under column 2 of the schedule, and how many were granted under column 3, so that we are clear as to the division between endowment and annuity mortgages.

§ Mr. Armstrong
Yes.