§ Mr. Adrian Sanders (Torbay)
I beg to move,That leave be given to bring in a Bill to enable and require the Housing Corporation to be joined in all possession proceedings by mortgagees against mortgagors in respect of the principal home of the mortgagor and his family.
The aim of the Bill is to reduce the social and welfare costs of repossessions by enabling people to keep their homes. It explores a way forward to find a more humane and, in the longer term, cheaper method of dealing with repossessions.
The Bill is timely, as the number of actions entered for repossession is rising once more and, given current economic trends, will continue to rise. Although no one expects the numbers to reach the levels of 1991 and 1992, each and every repossession is a human tragedy and a drain on the Exchequer. The Bill is also timely because of the Government's concerns about family breakdown.
Between 1969 and 1980, the number of repossessions a year was, on average, about 3,400. That number rose steadily to 26,390 in 1987 before falling to 15,810 in 1989. Between 1989 and 1991, there was an almost fivefold increase—to 75,000—in the number of repossessions. Since 1991, the number has decreased, although figures for the first half of 1998 show a small increase on those for the first half of 1997. Now, therefore, is the time to act.
People fall into mortgage arrears for a number of reasons, of which loss of income is by far the most common—it is cited in 70 per cent. of cases. A quarter of people in arrears mentioned as a factor household changes such as the loss of a partner, pregnancy or a new baby. A further quarter mentioned increases in mortgage or other regular repayments, although those reasons were rarely given in isolation.
There are added pressures on borrowers who fall into arrears. Government policy has run against the most vulnerable groups of householders. The previous Government cut the availability of income support for mortgage interest; new borrowers who lose their jobs now have to survive for the first nine months of unemployment without such help.
The change was intended to prompt a significant increase in the use of private insurance, which would replace the safety net of income support. Before the October 1995 changes, take-up of private insurance was between 12 and 16 per cent. The highest estimate of current take-up is 21 per cent., but according to the Chartered Institute of Housing that may be overstated.
The critical issue is whether those most at risk are likely to be insured. The evidence shows that they are not. About a third of borrowers would be eligible for income support if they lost all their income; of those, three quarters have no mortgage protection insurance, so at least a quarter of all borrowers have no protection and no means of paying for up to nine months if they lose their income.
A related issue is the effectiveness of private insurance. About 20 per cent. of claims are not met. That may be for legitimate reasons, but in some cases claims are rejected because of pre-existing conditions, which gives cause for concern about mis-selling. Home buyers are less secure than they were before the most recent recession.
875 Mortgage interest rate support has fallen further behind most people's actual repayments. The basket of interest rates used in the calculation for support includes only building societies and not the mutuals that have converted to banks, with their generally higher rates. Add in the delay between interest rate changes and the recalculation of income support, and one does not need a crystal ball to see that mortgagee arrears among welfare-dependent home owners will continue to rise.
The financial cost to those whose homes are repossessed is significant: there are legal expenses; interest payments on arrears; court fees and administration costs involved in fighting possession orders; and of course debt on the property, which the borrower will continue to owe.
The costs to the welfare budget include increased demand for social housing, through people applying directly to registered social landlords or going through the local authority homelessness route; increases in the housing benefit bill; the cost to local authorities of housing families in temporary accommodation; and the administrative costs of letting properties. It has been estimated that between 1990 and 1994 25 per cent. of households were initially rehoused in the social housing sector following repossession. Repossessions currently account for about 10,000 social housing units.
The personal cost should also be considered. Repossession leads to increased stress, which can lead to relationship breakdown and greater demand for health services. Children may have to change schools through having to move, and the emotional impact can lead to disruption in educational progress.
876 When courts make repossession orders, a social renting option is not considered, but for some people a conversion to rent, or even partial rent and shared ownership, could be the answer that allows them to stay in their home until financial circumstances improve. The Bill proposes that the court be allowed to consider the option of the lender's interest in the home being bought out by the Housing Corporation or another appropriate body, which would then rent the house back to the family or even grant a mortgage.
The Bill's requirements are not onerous. The court already has at its disposal the relevant evidence and an expert witness. District judges have a lot of experience in repossession matters. The Bill would allow the court to consider more options, and could result in a practical and humane resolution. It could hold out to families the hope that they could become home owners once again.
If we are to avoid a repetition of the misery experienced by thousands of households in the early 1990s, the time to act is now.
Question put and agreed to
Bill ordered to be brought in by Mr. Adrian Sanders, Mr. A. J. Beith, Mr. Chris Pond, Mr. Steve Webb, Mr. Martin Bell, Jackie Ballard, Mr. Peter Luff, Mr. Nigel Jones, Mr. Stephen Twigg, Mr. Mike Hancock, Mr. Barry Gardiner and Mr. Paul Burstow.