HL Deb 18 October 1989 vol 511 cc907-9

Lord Dean of Beswick asked Her Majesty's Government:

What was the total amount of mortgage interest paid by owner—occupiers for each quarter during 1988, and what are the comparative amounts for the first three quarters of this year.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh)

My Lords, it is estimated that in the four quarters of 1988 the amounts of mortgage interest paid by owner-occupiers in the United Kingdom were £4.8 billion, £4.9 billion, £5.7 billion and £6.9 billion. For the first three quarters of this year the equivalent figures were £7.5 billion, £7.9 billion and £8.3 billion.

Lord Dean of Beswick

My Lords, I am grateful to the Minister for those figures. Does he agree that the substantial increases that they show include a substantial increase in mortgage rates and that increase has to be met by owner—occupiers who still have outstanding mortgages? They are having to pay substantial increases due to the increased bank rates. I do not include the most recent increase. Have the Government any plans to assist first—time buyers or the more recent mortgagees who in increasing numbers are finding it impossible to meet their financial commitments and may well find themselves joining the homeless queue in the near future unless something happens?

Lord Hesketh

My Lords, the Government are well aware of the problems of those who are suffering from higher mortgage interest payments. However, they are also aware that to preserve the strength of the economy we must control inflation.

Lord Campbell of Croy

My Lords, in considering these figures is it being taken into account that some lending institutions, including the largest building society in this country, arrange for borrowers to even out rises in the mortage rate by paying identical monthly payments during a subsequent year and so delaying the impact of the change?

Lord Hesketh

My Lords, I am aware of that. The comment of my noble friend is entirely true and correct.

Lord Hatch of Lusby

My Lords, the noble Lord says that the Government are aware of the difficulties of mortgage payers. Is that sufficient? Do they not realise that they are responsible for these difficulties? When he talks about the necessity of controlling inflation, is it not the Government's policy which has caused inflation to rise, and in particular the Budget of 1988?

Lord Hesketh

My Lords, it is probably wise to remind your Lordships' House that on four previous occasions since 1979—between November 1979 and December 1980, December 1980, and March 1981, October 1981 and March 1982, and March 1985 and August 1985—mortgage rates were above 14 per cent.

Baroness Gardner of Parkes

My Lords, although it would clearly prevent any effect on reducing inflation if the building societies were too helpful to people with mortgages, because the increase in interest rates definitely has an impact on inflation, does the Minister agree that most building societies make every effort to help anyone in real difficulty? Does he think that the public are sufficiently aware of the fact if they are in difficulties they should approach their building society?

Lord Hesketh

My Lords, perhaps I may return partially to my previous Answer. The experience of over 10 years ago resulted in the building societies doing exactly what my noble friend has pointed out. The building societies are very accommodating on this point.

Lord Hatch of Lusby

My Lords, will the Minister explain the relevance of his answer to me? Is he simply saying that this Government have previously followed policies that have caused mortgage payers to pay higher interest rates?

Lord Hesketh

My Lords, the Government are dedicated, quite rightly, to controlling inflation. Occasionally that has resulted in interest rates having to rise. That is a different proposition from what was proposed by the noble Lord.

Viscount St. Davids

My Lords, will the noble Lord answer a question that puzzles me and causes trouble to a number of other people? This money is coming from the borrowers, but it is going to the lenders, who are thus being given more money. What is the effect of this on the financial position in this country?

Lord Hesketh

My Lords, it is probably fair to say that those who were the lenders 18 months ago felt that they were getting the short straw.

Lord Bruce of Donington

My Lords, the noble Lord has indicated in his first reply that the interest rate rises were necessary to protect the strength of the economy. Will he explain how this is accomplished? When his Government first came into office in 1979 they hiked interest rates up to 17.5 per cent., produced a rate of inflation of 21 per cent., a rise from 10.3 per cent., and thereafter precipitated one of the worst depressions that we have had in this country. Will the noble Lord explain how the rise in interest rates will protect the economy? To which is he referring?

Lord Hesketh

My Lords, often an inheritance is beneficial. On that occasion it was problematical.

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