HL Deb 08 May 1975 vol 360 cc452-5

3.14 p.m.

The Earl of K1NNOULL

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government how soon the present limit on special advance loans with building societies will be raised from £13,000 in order to cater more adequately for the present needs of the mortgage market.

Lord JACQUES

My Lords, the Building Societies Association has made a formal request for such an increase, and the Government are now giving careful consideration to it.

The Earl of KINNOULL

My Lords, while thanking the noble Lord for that reply, may I ask him whether he could confirm that the Building Societies Association has in fact been requesting that this limit be increased since 1972? Secondly, could he also confirm that the real reason for this is that there are many people who are unable to get mortgages above this limit from the building societies, and, therefore, have to move into the second mortgage market to prop up the mortgage? In many people's view, this is quite unnecessarily expensive.

Lord JACQUES

My Lords, I would ask the noble Earl to consider certain questions of fact which are associated with this problem. The first is that few building societies have been making special advances on a scale anything like the 10 per cent. permitted by law; in fact the latest figures show that the special advances are only 4 per cent. of the total advances. Secondly, the latest figures for advances, which are for the month of February 1975, show that the average mortgage is only £6,837. Finally, would he bear in mind that, if the £13,000 limit were increased, no building society could use that increase until the beginning of the year following the date of the Order, and since most building societies—not all, but most—finish their year on 31st December, they could not operate an increase in the £13,000 until 1st January 1976?

The Earl of KINNOULL

My Lords, surely the noble Lord would agree that if the building societies are not able to bring into force what may be decided by the Government that is a good reason for the Government making a decision in the fairly near future? May I ask the noble Lord one other question. He spoke about average mortgages. Would he agree that the average of £6,000 throughout the country does not represent certain key areas in the South-East of England, where the average must be a great deal higher?

Lord JACQUES

My Lords, there are really two questions there. The first is on the date of decision. I would say that the decision will be made within a reasonable time. There is not a great need for urgency because it cannot be operated by most building societies until 1st January 1976, but in any case it will be made in good time even for those societies whose year commences earlier than that. With regard to the noble Earl's second question, so far as I am aware, the figure I have quoted for mortgages covers the whole country. I have not been advised that it covers only part of the country.

The Earl of KINNOULL

My Lords, could the noble Lord say whether "in good time" or "reasonable time" means that this decision which the Government are considering will be taken in weeks, months or years?

Lord JACQUES

My Lords, I can say it does not mean years. It may mean months, but I do not think very many.

Lord AVEBURY

My Lords, if this increase which might be agreed is to come into operation on 1st January 1976, is it not likely that with inflation roaring ahead at 20 per cent., and accelerating, that figure will become out of date in a few months' time? Would the noble Lord consider in the discussions with the building societies whether the figure should be indexed, so that it corresponds to the value of building materials as shown by the official statistics of the Department of the Environment?

Lord JACQUES

My Lords, as I have explained, there are other things to be considered than the price of houses. How far do the building societies need the special advances? At the moment they are permitted special advances up to 10 per cent.; they are only using 4 per cent. instead of the 10 per cent. permitted by law. There is not a great case for change, but I believe a change will be made.

Lord DRUMALBYN

My Lords, may I ask the noble Lord to clarify one thing he said. Over what period was the average taken of mortgages granted? Could he further say what was the average amount of mortgages granted over the past 12 months?

Lord JACQUES

My Lords, I only have the one figure, and, as I said, it was for February 1975.

The Earl of ONSLOW

My Lords, would the noble Lord clarify his answer that the Government do not think there is a great case for changing existing arrangements and then saying that he believes they will be changed? Could he clarify that remark?

Lord JACQUES

My Lords, there is not a great case for change, based upon the figures available from the building societies as to their use of this facility of granting 10 per cent. special advances, but there is a need for change when one has regard to house building prices as compared to 1971, when this figure was last determined. There is a case for and a case against. I believe that a decision to improve the existing figure will be made at an early date.

Lord DAVIES of LEEK

My Lords, in view of the know-how of the building societies obtained over many years and the average common sense prevailing, may I ask my noble friend whether there has been any approach to the Government to do anything about this inflation accounting?

Lord JACQUES

My Lords, I think that that is another question. As I understand it, inflation accounting is miles away from this Question.