HC Deb 08 November 1978 vol 957 cc937-41
4. Mr. Andrew MacKay

asked the Secretary of State for the Environment if he is satisfied with the present availability of building society mortgages.

11. Mr. Michael Morris

asked the Secretary of State for the Environment when he expects next to meet the chairman of the Building Societies Association.

Mr. Shore

Although mortgage lending has been restrained to dampen pressure on prices, in the nine months to end-September building societies committed 602,000 mortgages—a monthly average of 67,000. This is a record figure—above the previous record achieved in 1977. My Department and I maintain regular contact with the Building Societies Association, and I shall be seeing its chairman, Mr. Stow, later this month.

Mr. MacKay

Is the Secretary of State aware that there is still a desperate shortage of mortgages and that, although the figures might be the best ever, that is because of inflation? That is one reason why prices have gone up so much, and another is the Community Land Act and development land tax. What will the right hon. Gentleman do to make mortgages more easily available to people waiting to buy but unable to do so at present?

Mr. Shore

I think that the hon. Gentleman did not listen carefully enough to my answer. I was referring not to amounts of money but to the number of mortgages that have been made available Although there undoubtedly is a demand for mortgages which is higher than the existing ability of the societies to supply, this is not a new phenomenon; indeed, it is an established one. However, despite that, more mortgages are being provided this year than in any previous year for which we have records.

Mr. Morris

Has the Secretary of State studied his own press notice No. 582 and the Abbey National's report "Homes, People, Prices and Places"? Both those show clearly that house prices have risen this year by well over 20 per cent. Does this not demonstrate to the Secretary of State the futility of restricting mortgage lending, because the only sufferers are the young people waiting for mortgages?

Mr. Shore

I do not agree with the hon. Gentleman. Undoubtedly, prices have risen this year, and it was precisely because of my anticipation of prices continuing to rise during the spring and summer that I took the action that I did with the Building Societies Association to dampen down the rate of lending. I genuinely believe that if we had not done that—here I come to an entirely different conclusion from the hon. Gentleman—prices would have gone up far more sharply and quickly than they have.

Mr. Hardy

I congratulate my right hon. Friend on the real achievement which his answer illustrates. Has he noted that Opposition Members seem rabidly eager to see a trebling of house prices again, such as we experienced between 1970 and 1974?

Mr. Shore

My hon. Friend is absolutely right. I should have thought that there was one lesson that we all should have learnt from the period 1970 to 1973. I remind the House that in that period, when there was total indiscipline in money supply not only in national terms but in terms of building society lending, secondary bank lending, and so on, house prices rose by 100 per cent. in three years. I shall not allow that to happen if I can possibly help it.

Mr. McCrindle

Has the Secretary of State seen the article in The Times today which reaches the conclusion that, while he was right to be concerned about the tendency for house prices to rise, he was wrong to interfere with the building societies because it has not led to the reduction in prices that he hoped for but has in fact led to an extension of the mortgage queue? The article states also that this policy is likely to be jettisoned quite soon. Can the Secretary of State confirm that?

Mr. Shore

The hon. Gentleman's main point is simply to repeat the earlier point to which I replied. Of course, prices have gone up this year, and, to be fair, this follows three years during which prices rose very modestly indeed. But I believe that if we had not taken joint action with the building societies prices really would have taken off in a way which would not have helped young people and first-time home purchasers at all. We all know what happened in 1974. The market collapsed and people were unable to get the mortgages they needed. Therefore, I do not accept what the hon. Gentleman has said.

As for the future, the building societies, myself and the Department will continue to review the situation, and so we should, using the machinery set up by the right hon. and learned Member for Hexham (Mr. Rippon). The joint advisory committee of the Government and the building societies was set up by the Conservative Government after the disasters of 1970 to 1973 to monitor the amount of money available for lending, with the purpose of achieving greater stability. We are using that machinery not after the horse has left the stable, but before.

Mr. Dempsey

Is my right hon. Friend aware that more mortgages could be made available if some building societies were more co-operative, and that the Government have nothing to do with this situation? Does he realise, for example, that in my area the most indefensible excuses about ground foundations are made to withhold mortgages from anxious young couples keen to have their own homes? It is not time that we took some action against the recalcitrant building societies which are causing the famine in house ownership?

Mr. Shore

I am always prepared to listen to any case that my hon. Friend puts to me, but I must say that, particularly in the sort of area which has concerned so many people on our side of the House over the past two years—the areas of red lining, the inner city areas—we have had a substantial degree of cooperation from the building societies, and I should be very happy to take up any particular case with them.

Mr. Stephen Ross

Is it not a fact that the people with the money now are the institutions and pension funds? Why is it not possible to use some of that money for house mortgage purposes?

Mr. Shore

I put it to the hon. Gentleman that the problem at the present time is not the supply of money but the interaction of too large a supply of money and a limited stock of houses for sale. Looking further ahead, I point out that the question of how all the financial institutions may best contribute to the general objective of house building and house ownership is something on which the Wilson committee or other bodies may be able to throw light.

Mr. Heseltine

As the number of new houses being completed is historically very low, and as the number of mortgages being granted is at a recohrd level, does that not prove that the standard of living of the British people as regards housing has dropped significantly under this Government?

Mr. Shore

That is a very difficult one. The hon. Gentleman really has caught me on it. All I say to him about the standard of living is that if we have built, as we shall by the end of this year, an additional 1½million new homes in Britain, against a background of the most severe recession and disturbance, I do not think that people can say that the standard of housing, at any rate in so far as it is a component of the standard of living of this country, has fallen. They would say, on the contrary, that it is rising.