Interest Rates (Hansard, 11 June 1992)

§ 4. Mr. Pike
To ask the Chancellor of the Exchequer what discussions he has had recently with the mortgage lenders association regarding interest rates.

§ The Economic Secretary to the Treasury (Mr. Anthony Nelson)
My right hon. Friend met the Council of Mortgage Lenders on 2 June. A number of issues were discussed on that occasion.

§ Mr. Pike
I thank the Minister for his reply. Does he recognise that the average mortgage interest rate is still 10.98 per cent. and that since the Tories came to power in 1979 there have been only two months when interest rates were below 10 per cent? Does the Minister recognise that, for many people, continuation of the abolition of stamp duty will not be as important as getting mortgage interest rates below 10 per cent. and keeping them there?

§ Mr. Nelson
It is a sign of success, rather than failure, that the Government's economic policies have led to nine successive reductions in interest rates, amounting to 5 per cent. The average mortgage interest rate is now under 11 434 per cent. On a typical £30,000 endowment mortgage, payments are down by £85 a month since October 1990. By any account, that is considerable progress.

§ Mr. Colvin
The House is aware of the value of mortgage interest tax relief to home buyers, but has my hon. Friend considered the introduction of a more general housing tax allowance that could be made available to those who rent their homes as well as to those who buy their homes? That would help to bring down the net cost of renting and would also help to bring on to the market some of the 650,000 dwellings that at present are sitting empty.

§ Mr. Nelson
My hon. Friend makes an interesting suggestion. We acknowledge the importance of the private rented sector. The cost of mortgage interest relief is considerable. The Government have already introduced a number of expensive and worthwhile measures to encourage the private rented sector.

§ Mr. Battle
Will the Government admit that, according to their figures, since they introduced their relief scheme the number of people in mortgatge arrears who have been taken before the courts has increased every month this year? Will the Government now accept that the scheme has proved to be ineffective and a damp squib? Will they immediately consider a scheme to convert mortgages into rents to ease the mortgage misery faced by many millions of people?

§ Mr. Nelson
That is certainly not the view of the Council of Mortgage Lenders, which estimates that, as a result of the package of measures introduced by my right hon. Friend the Chancellor, there will be about 55,000 fewer repossessions this year than would otherwise have been the case.

§ Mr. Nicholls
Contrary to what my hon. Friend has just heard from the hon. Member for Leeds, West (Mr. Battle), the mortgage rescue scheme has been very successful in my constituency. Will my hon. Friend refute the suggestion, implicit in what has been said, that there could ever be a time when some homes are not repossessed? Is it not significant that fewer than 0.5 per cent. of all existing mortgage holders are in danger of having their homes repossessed?

§ Mr. Nelson
My hon. Friend is absolutely right—the figure is less than 0.5 per cent., although the Government acknowledge that in each individual case that means real distress for the family involved. However, we cannot indemnify every possible position. The measures introduced by my right hon. Friend have brought real relief to many tens of thousands of people.

§ Mrs. Beckett
Does the Minister recall that when his right hon. Friend the Chancellor announced his scheme just before Christmas, he claimed that it would help some 40,000 families? Most hon. Members understood him to be saying that that would be achieved by August. Can the hon. Gentleman confirm that fewer than 10 families have been helped? If so, as both the problem and the money that the Government set aside to solve it still exist, why do not the Government announce an extension of the scheme?

§ Mr. Nelson
I think that I can help the hon. Lady because her facts and her understanding are wrong. The Council of Mortgage Lenders has confirmed that, in its 435 opinion, the package introduced by my right hon. Friend the Chancellor will save not 10 but 55,000 people from repossessions. It is true that only a limited number of people are being helped by schemes at present, but that is also a reflection of the fact that many people have been saved from repossessions and so are able to continue to occupy their homes.

§ Mr. David Shaw
Does my hon. Friend agree that one reason why there have been so many reductions in interest rates is that the markets have considerable confidence in the Government? Does he further agree that, to retain that confidence and to make further interest rate reductions possible, we need policies to ensure that public expenditure is restrained and that pay policies in both the public and the private sectors are moderate in the forthcoming pay round?

§ Mr. Nelson
My hon. Friend is right; the Government are fully committed to constraining public expenditure and reducing inflation. That is the surest way to bring about further reductions in interest rates and mortgage interest rates.