§ 1. Mr. Gordon Prentice (Pendle)What estimate he has made of the number of house buyers likely to switch their mortgages from lenders trading in sterling to those trading in the euro. [50487]
§ The Chief Secretary to the Treasury (Mr. Alistair Darling)The United Kingdom mortgage market is already one of the most competitive in Europe. The narrow differential between longer-term interest rates in Britain and in Europe and the need to manage currency exposure are likely to make these specialist products.
§ Mr. PrenticeI am not entirely sure about that. It seems that, if there is a big gap between interest rates in the sterling zone and those in the euro zone, it would make sense for people entering the mortgage market to go where mortgages are cheap, or cheaper. I have had a letter from one of the big high street banks telling me that it will be offering euro mortgages next year. What is to stop French, German or Dutch banks—banks throughout the European Union—putting advertisements in the national press here to induce people to switch from sterling mortgages to euro mortgages, which may be more beneficial?
§ Mr. DarlingThe answer is that, subject to the regulatory requirements that are enforced in this country, there is nothing to stop any French or German bank or other financial institution from offering mortgages in this country. Indeed, British lenders are already offering mortgages in other member states. That is what the single market is all about.
§ Mr. John Bercow (Buckingham)Given that 89 per cent. of mortgage finance in the United Kingdom is held 1240 at variable rates and given the simple established fact that mortgages account for almost 11 per cent. of average earnings in the UK—by contrast, they account for only 3.5 per cent. of average earnings in the rest of the European Union—will the right hon. Gentleman, in his public information campaign about the single currency, make it abundantly clear to the British people that they will be much more damaged by an increase in interest and mortgage rates under the single currency than they would be if they lived in France, Germany or elsewhere in the EU?
§ Mr. DarlingI should have thought that the hon. Gentleman might have thought long and hard before he asked that supplementary question, because the last time that mortgage rates in this country increased dramatically to double figures was in the late 1980s, following mismanagement by the previous Government. I should have thought also that he would have supported this Government's policy, which is geared to reducing inflation, so that we can bring down interest rates and get long-term stability. The final point that he might want to bear in mind is that interest rates in continental Europe have always been lower than those in this country because it has had the long-term economic stability that this country has not had, primarily because of the stop-go, boom-bust, high-interest-rate policies that were operated by the previous Government.