Housing and Interest Rates (Hansard, 24 January 1989)

The Minister of State, Department of the Environment (The Earl of Caithness)
My Lords, the increase in house prices has slowed down, to an extent that varies between different parts of the country. The number of houses being sold appears to have fallen, and there are no definite signs as yet of a fall in house building.

§ Lord Dean of Beswick
My Lords, I appreciate that Answer, but I am not surprised that the Minister made no reference to mortgage payments. Is he aware, when talking of mortgage payments, that a person receiving a £20,000 discount on purchasing his council house—there are now quite a large number of such people—receives the equivalent of a £50 payment per week towards his mortgage? At the same time people in the same income group who happen to be unfortunate enough to be owner occupiers have faced an increase of £40 to £50 a month. When will the Government have the same sympathy for owner occupiers as they appear to show readily to people receiving these discounts on council houses?

The Earl of Caithness
My Lords, of course we encourage owner occupation. I am pleased with the way the right to buy provisions have progressed.

§ Lord Molloy
My Lords, does the Minister agree that there have been a few thousand incidents where folk on the point of buying their own homes find that because of these steady increases in interest rates they cannot afford to do so and foreclosure takes place? That means that a house becomes empty and someone else becomes homeless. Do the Government not take those kind of things into consideration?

The Earl of Caithness
Yes, my Lords, of course the Government consider that aspect. But if the noble Lord refers to the Answer that I gave to the noble Lord, Lord Dean of Beswick, on 11 th October, he will see that I covered the point very clearly then.

§ Lord Taylor of Gryfe
My Lords, is there not some contradiction in the Government's policy, which is encouraging home ownership at the same time as putting up mortgages? That has resulted in a dramatic fall in mortgage lending in the past month. The figure stands at about half that of the previous month.

The Earl of Caithness
My Lords, I do not have the figure for last month, but the figures that I have show that on average in the first quarter of last year 109,000 mortgages were taken out per month. In October, which is the latest month for which figures are available, that figure was 81,000.

§ Lord Harmar-Nicholls
My Lords, is my noble friend aware that considered opinion everywhere is unanimous on the fact that the Government should retain the containing of inflation as their number one priority?

The Earl of Caithness
My Lords, I hope the opinion is unanimous. From some of the remarks I have heard recently, I think some people would prefer inflation to go up.

§ Lord Jacques
My Lords, is the Minister aware that the policy of the Government apparently has been to control inflation, but that their first priority has been the reduction of direct taxation regardless of the effect upon inflation? One can go back to the increase in VAT and the reduction in direct taxation to support that point of view.

The Earl of Caithness
My Lords, indeed it is of vital importance to the whole country and to everybody in it that inflation is kept down.

§ Lord Stallard
My Lords, is not the answer to the original Question—the effect of interest rates on the current housing situation—the fact that 450 people per week are having their homes repossessed because of mortgage default? That figure is expected to rise very shortly to about 700 people. Those people are joining ever lengthening queues for non-existent public housing. In 1987, the latest figures that I can find, 370,000 people were accepted as homeless by authorities on the authorities' own criteria. Is that not the real answer as regards the situation that currently exists as a result of government policy on housing?

The Earl of Caithness
My Lords, if one compares the figures for the first half of 1987 with those for the first half of 1988, one will see that repossessions are down, overdue loans are down and the proportion of homeless as a result of this is also down.

§ Lord Hailsham of Saint Marylebone
My Lords, until recently was it not the policy of the Labour Party to stop people buying their houses at all?

The Earl of Caithness
My Lords, it is sometimes very difficult to keep up with the policy of the Opposition.

§ Lord Pitt of Hampstead
My Lords, I should like to ask the noble Earl a very simple question: are the Government really suggesting that it does not matter how many people are made homeless as long as they continue with a particular policy?—because that is what the Answer suggests. Is the Minister aware that there is increasing homelessness because people who have bought their houses are unable to continue with their mortgage payments? That is the problem that 591 we are asking the Minister to address himself to. Will he say what the Government will do about it?

The Earl of Caithness
My Lords, I do not agree that there is the link that the noble Lord has suggested. There was a long discussion yesterday at Question Time about the homeless, in response to a Question by the noble Lord, Lord Dean of Beswick. There are a number of other reasons such as, alas! the break-up of marriages, which cause people to give up their houses.

§ Lord Mellish
My Lords, I accept what the Government say about inflation being the number one enemy. That is a view with which I concur absolutely and in my view there is no argument against it. However, is there not an irony in the situation? A young married couple, for example, to take a simple case, buy their own home. They are very excited and pleased. Their repayments are £250 a month. Before they move in the repayments have risen to £350 a month, and they are now asked to pay £400 a month. Is it not ironic that, as a result, the Government's policy with regard to inflation will be destroyed, because the first thing that that young man will do is demand an increase in wages?

The Earl of Caithness
My Lords, the noble Lord and the Government are in agreement that it is of primary importance that inflation is kept down. There have been high interest rates before, but as I said in answer to the noble Lord, Lord Dean of Beswick, on llth October, the building societies and mortgage lenders will look at every case in order to minimise their impact.

§ Lord Graham of Edmonton
My Lords, will the Minister take on board the fact that, while part of the nexus of housing is mortgage payments, it must also be recognised that for many of us it is adequate housing for those in need which counts? Will the Minister tell us what the Government are doing to encourage councils to build houses at affordable rents?

The Earl of Caithness
My Lords, we touched on that issue yesterday. I should remind the noble Lord that it is not only local councils which are involved. Provision for the funding of housing associations will go up by 80 per cent. in the next three years, and there is also the private sector.

§ The Countess of Mar
My Lords, does the noble Earl agree that to some extent the building societies are responsible for the problems in which many young people find themselves, because they let them take on too large a mortgage while interest rates are low without anticipating what happens when interest rates rise?

The Earl of Caithness
No, my Lords, I do not think that one can blame the building societies in that respect.

§ Lord Dean of Beswick
My Lords, the Minister is usually most sympathetic in his answers towards 592 people who are receiving rough treatment in the housing sector. It is sad that he does not appear to have expressed any sympathy whatsoever today for people whose mortgages have risen excessively as a result of government policy. Is the Minister satisfied that owner occupiers ought to be the chief victims of the blundering of the Chancellor of the Exchequer? And when is it going to stop?

The Earl of Caithness
My Lords, I should seriously contest that my right honourable friend the Chancellor of the Exchequer has blundered. There is a very positive incentive for people to own their homes. That is what people want to do. All of us who have mortgages would obviously prefer interest rates to be lower. However, I know that all those who pay mortgages would prefer slightly higher interest rates now than higher inflation in due course.