HC Deb 23 November 1977 vol 939 cc1518-20
15. Mr. Wigley

asked the Secretary of State for the Environment if he will seek a meeting with representatives of the building societies to persuade them to reduce the interest rates on home loans.

Mr. Freeson

The Government maintain regular contact with the Building Societies Association. There have been three welcome reductions in mortgage rates this year. If receipts continue at present high levels, I am sure that societies will consider a further reduction.

Mr. Wigley

Is the Minister aware that in October there were record receipts of £590 million by building societies and that that high level has continued into November, in spite of a 1 per cent. drop in interest rates? Does the right hon. Member agree that building societies have been laggardly in passing on reduced interest rates to home buyers? Does he realise that many people believe that there is bogus competition between the building societies that smacks of the worst elements of a cartel, which is not in the public interest?

Mr. Freeson

I do not accept that there has been laggardliness. We have seen several cuts in the interest rate in rapid succession. However, the hon. Gentleman has put his finger, if not directly then indirectly, on an important problem, namely, the balance that must be maintained over a period of time, because there cannot be reactions to situations month by month. Our job—which we carry out jointly with the building societies—has been to maintain stability as far as possible. That means that in good times we must allow an inflow of money to take place at a certain level without an equivalent outflow into mortgages, so that resources will be available should the inflow drop later, while the outflow would have to be maintained. That is the difficult balancing process that we constantly attempt, together with the Building Societies Association.

Mr. Hooley

What pressure will be brought on the local authorities to bring down their lending rates? There is some bitterness among those holding local authority mortgages that their interest rates are higher than those paid on building society mortgages.

Mr. Freeson

Local authorities have a different financing structure, which gives rise to this problem. It is not a matter of pressure being required. We are watching the Consolidated Fund loan rates that give rise to this pattern. However, at other times building society rates have gone up while local authorities have lagged well behind in their interest rate increases. There is a balancing process, which does not always produce bad results for local authority borrowers.

Mr. McCrindle

With 15 changes in the minimum lending rate during 13 months, entirely as a result of Government policy, will there not certainly be a gap from time to time that can sometimes work to the advantage as well as to the disadvantage of borrowers? Do we not hear much less from hon. Members on the Government side when that happens?

Mr. Freeson

I was not aware that the comments or queries put to me had come from just one side of the House, but I probably accept what the hon. Gentleman said.

Mr. MacFarquhar

Is my right hon. Friend aware that the Building Societies' Association has informed me that there is likely to be a further reduction in the mortgage rate towards the end of the year, or possibly early in January? Will he confirm that his Department is investigating methods by which it is possible to ensure that local authority mortgage rates are brought more into line with the rates of building societies? What is he proposing to do in this regard?

Mr. Freeson

On the last point, I can only refer my hon. Friend at this stage to the suggestions that we have put in our Green Paper on Housing Policy. On the first point, I am aware that there has been a general statement to this effect, but I would not define the statement that my hon. Friend attributed to the BSA as a decision that has still to be taken.