HL Deb 08 June 1989 vol 508 cc936-8

3.5 p.m.

Lord Dean of Beswick asked Her Majesty's Government:

Whether, in order to reduce the present hardship being experienced by owner-occupiers, they intend to announce a cut in the Bank Lending Rate; and, if so, when.

Lord Strathclyde

My Lords, the Government never speculate on future movements in interest rates, but everyone has far more to fear from a resurgence of inflation than from a period of high interest rates.

Lord Dean of Beswick

My Lords, is the Minister not aware that there is a substantial increase in the number of mortgage foreclosures and that people are losing their homes because of their inability to meet the heavy interest payments? Is he also aware that the number is escalating dramatically? Are the Government prepared to let the present situation continue and do nothing to help those who are the victims of their policies?

Lord Strathclyde

My Lords, inflation is a far greater problem than high interest rates. My information is that only one-fifth of 1 per cent. of all loans result in repossession. Indeed the number of repossessions between the first half of 1988 and the second half showed a reduction of 34.7 per cent.

Lord Boyd-Carpenter

My Lords, is my noble friend aware that, however hard are the present rates of interest on mortgage borrowers—as all noble Lords will appreciate—it would be harder on them and the rest of us if inflation were allowed to get out of hand?

Lord Strathclyde

My Lords, my noble friend is right. The Government regret any hardship caused to mortgage borrowers. However, as we have said, inflation is a far greater problem.

Lord Tordoff

My Lords, is the noble Lord not aware that not only do we have high interest rates but also increasing inflation?

Lord Strathclyde

My Lords, that is a short-term phenomenon. In the second half of this year inflation will fall back.

Lord Stoddard of Swindon

My Lords, is the noble Lord aware that, according to the credit figures which were announced earlier this week, high interest rates are not working? Does he agree that they merely put up costs to businesses and owner occupiers? Will he now urge his right honourable friend to adopt further measures of credit control including the deposit by the banks of special deposits with the Bank of England?

Lord Strathclyde

My Lords, credit controls do not work. The economy is slowing down. We have seen house prices falling considerably in certain areas. Retail sales have dropped since last summer. MO has slowed down considerably and is coming within the target area.

Lord Bruce-Gardyne

My Lords, does my noble friend agree that noble Lords opposite are being a little ungenerous about the matter? Is it not the case that, because of its differentially severe effect on the areas in the South-East with high mortgages, the present correct policy of high interest rates is doing more to narrow the so-called "north-south divide" than all the regional policies of all the governments since the war? Should not the Opposition be grateful for that?

Lord Strathclyde

My Lords, that is a most interesting argument and I am sure that noble Lords opposite have taken it on board.

Lord Mellish

My Lords, will the Minister understand that while nearly everyone supports the principle of a property-owning democracy, it becomes immoral when a young married couple sign a contract which says that a certain amount of interest will be repaid and are then told—for reasons unknown to them and not understood by them—that the interest rates have gone up and then gone up again? I know of one instance where the mortgage repayments have become absolutely appalling.

Lord Strathclyde

My Lords, all mortgage borrowers are aware that interest rates can go up as well as down. Also, building societies offer certain budget plans where increases or falls only take place once a year.

Lord Mason of Barnsley

My Lords, can the Minister tell the House what is one-fifth of 1 per cent. of repossessions? What are the figures?

Lord Strathclyde

My Lords, out of a total of 7.5 million loans, in the period from July to December 1988 there were 6,380 repossessions.

Lord Bruce of Donington

My Lords, further to what my noble friend said, is the noble Lord aware that on an annual basis there were some 20,000 repossessions in 1988, which is nine times the number in 1978–79? Can the noble Lord give the House an assurance that those property owners will not be squeezed by a further increase in interest rates in order to sustain, among other things, the overseas value of the pound?

Lord Strathclyde

My Lords, the noble Lord knows perfectly well that I cannot give him that assurance. However, as regards repossession, according to the Building Societies Assocation the main causes of mortgage problems are matrimonial, unemployment and financial mismanagement difficulties. The Government have been able to help with unemployment and will no doubt turn their efforts to the other two problems in the near future.

Lord Dean of Beswick

My Lords, is the Minister not aware that the figure for the Government's housebuilding programme this year shows a serious downward turn? Is that not because of the high interest rates? Bearing in mind that the Minister sat and listened to yesterday's debate on the homeless, does he not believe that it showed there is little prospect of helping people in that terrible situation?

Lord Strathclyde

My Lords, from what I gathered of the debate yesterday, in most parts of the country there are more houses than there are people to live in them. There are certain areas where there is a substantial problem. My noble friend Lord Caithness said that he was very sympathetic to that and that he was looking further into the problem as a whole.