§ 8.48 p.m.
§ Lord JACQUES rose to move, That the Draft Building Societies (Special Advances) Order 1975, laid before the House on 24th June, be approved. The noble Lord said: My Lords, I beg to move that the Building Societies (Special Advances) Order 1975, laid before the 1229 House on 24th June, be approved. If the draft Order is approved, it will enable a building society to advance to an individual up to £20,000 instead of £13,000 as a present, without the society having to treat the advance as a "special advance" for the purpose of the Building Societies Act 1962. Special advances are defined in the Act as all mortgage advances to companies and mortgage advances above a specified limit to individuals. If at the end of its financial year a building society has made special advances in excess of 10 per cent. of its total lending, restrictions are placed on the issue of further special advances. The purpose of this arrangement is to provide an assurance to investors that building society lending will be predominantly directed towards normal owner occupiers.
§ In the light of representations by the building societies, the Government have now agreed that £20,000 is an appropriate lower limit for special advances rather than the figure of £13,000 which was set in 1971. This will provide a reasonable degree of freedom to those societies, particularly in the South-East, whose clients include purchasers of relatively expensive houses. Most mortgages are well below the present limit so we do not anticipate the increase to have a detectable effect on house prices. I invite the House to approve the Order. I beg to move.
§ Moved, That the Draft Building Societies (Special Advances) Order 1975, laid before the House on 24th June, be approved.—(Lord Jacques.)
§ Lord SANDYS
My Lords, we support the Order in its intention. The only commentary that I think must be made on this is whether making this proposal will have an inflationary effect on house prices. We feel, certain that this is not the Governments intention. Nevertheless, by increasing this limit there is the underlying suggestion that it is adding a certain inflationary effect. Notwithstanding that point it will clearly assist both the would-be purchasers and the general good health of the house-purchasing business in this country. Therefore we support the Order. It is a melancholy fact that only as short a time ago as 1971 the limit was £13,000 and that an increase to £20,000 in so short a period has proved necessary. Nevertheless, we recognise what has appeared in the trade press recently; since the beginning of 1230 the year house prices have increased by no less than 3 per cent. and probably more than that. We are aware of the situation and it is therefore clearly the Government's duty to take powers under Section 21(6) of the Building Societies Act in this regard.
§ Lord JACQUES
My Lords, I would point out that the amount of £20,000 proposed is much less than it would have been had we followed average house prices. If we had followed them, the £13,000 in 1971 would now have been £27,700, so we have applied some restrictions. Secondly, I would point out that the average mortgage even in the South-East is well below the limit and is far below the special advance limit of £20,000. The average building society mortgage in Greater London is £8,647, in the rest of the South-East it is £8,147 and in the whole country it is much smaller. I hope that information is helpf
§ On Question, Motion agreed to.