HC Deb 27 June 1996 vol 280 cc461-2
13. Sir Michael Shersby

To ask the Chancellor of the Exchequer what has been the effect on the average mortgage payment of recent reductions in interest rates. [33418]

Mr. Heathcoat-Amory

The cuts in mortgage rates over the past year will leave the average mortgage payer about £400 a year better off.

Sir Michael Shersby

Does my hon. Friend agree that average mortgage payments are now about £107 a month lower than they were in October 1990—even allowing for mortgage interest relief at source—that the affordability index is now excellent, particularly for first-time buyers and that there is strong evidence that they are coming back into the market in large numbers?

Mr. Heathcoat-Amory

Yes, my hon. Friend is spot on. House prices are relatively low compared with average earnings, so property is a good buy. Meanwhile, the four interest rates cuts since the Budget have been followed by mortgage interest reductions. That is good news for millions of borrowers and has helped to continue the steady increase that is fully sustainable in house prices.

Mr. Chisholm

In spite of the fact that our interest rates are higher than those in any G7 country apart from Italy and that the City expects interest rates to rise in the next year, is it not the case that interest rates have not fallen in order to help mortgage payers, but because of fundamental weaknesses in the economy with manufacturing in recession and manufacturing investment in decline?

Mr. Heathcoat-Amory

The hon. Gentleman may be disappointed that the British economy is now performing extremely well by international and historic standards. Mortgage interest rates are now below 7 per cent.—the lowest level for about 30 years—compared with a rate of more than 11 per cent. under the last Labour Government.

Mr. Bernard Jenkin

May I congratulate my right hon. Friend on his success in reducing interest rates? Does he agree that that is best achieved by applying a national monetary policy to national economic conditions and making sure that we have a balanced economic framework to produce the best outlook for a generation?

Mr. Heathcoat-Amory

I agree that it is an impressive achievement in monetary policy. My hon. Friend also knows that we have no immediate plans to transfer monetary policy to anyone other than the Treasury.