HL Deb 20 February 1991 vol 526 cc546-8

3.4 p.m.

Lord Molloy asked Her Majesty's Government:

Whether they will introduce legislation to prevent repossession of the houses of those who cannot meet their mortgage repayments due to high interest rates.

The Parliamentary Under-Secretary of State, Department of the Environment (Baroness Blatch)

My Lords, no. The lender must have security in the event of default. If the law were changed to remove that security, mortgages would cease.

Lord Molloy

My Lords, while I thank the noble Baroness for that compassionate reply, is she aware that already 100,000 families are homeless and that people are being made homeless at the rate of 800 a week? Is she aware that that creates enormous burdens for local authorities which have to try to rehouse some of those people in bed and breakfast accommodation? Is she also aware that many of the houses from which those people have been evicted are still empty? Will the Government consider extending the period for paying back the mortgage and reducing the amount required immediately in order to give those people a chance to stay in the homes which they set out to buy with so much pride?

Baroness Blatch

My Lords, the Question on the Order Paper asks whether we will introduce legislation to prevent repossession. Legislation is not required to permit some of the measures which the noble Lord suggested. Those changes can come about within the existing legislation.

Lord Gisborough

My Lords, is my noble friend aware that building societies are falling over backwards to avoid repossessing homes and are very happy to reschedule loans? Does she agree that it is very important that borrowers contact building societies as soon as possible and do not leave it until the last moment?

Baroness Blatch

My Lords, my noble friend has made a very important point. It is not in the lenders' or anybody's interest that homes should be repossessed. The Council of Mortgage Lenders has produced a code of practice and has appealed to people to get in touch with the lender when they first have difficulties. Local authorities are aware of the code of practice. The Government have made £11 million available to citizens advice bureaux to help counsel people who are in difficulty.

Lord Stallard

My Lords, will the noble Baroness comment on the building society policy of pursuing borrowers for the difference between the repossession price and the amount that is outstanding?

Baroness Blatch

My Lords, the noble Lord referred to what a lender does at the very end of the line after all other avenues have been pursued. If people in difficulties seek advice early a range of measures is available to them: deferring interest; extending the period over which a loan has been taken out; income support relief for people on income support to meet at least half of the interest for the first 16 weeks and all of the interest on a loan thereafter; and, where feasible, advising people to rent out part of the property. At the end of the day, when all else has been considered and where a person whose home has been repossessed is in a position to meet the bill, that bill has to be met by somebody.

Lord Stallard

My Lords, with respect, the noble Baroness has not replied to the question. I asked her about the people who have been through all those stages and the building society then pursues them for the difference between the repossession price and the amount that is outstanding.

Baroness Blatch

My Lords, the lender allows someone to borrow money at a rate of interest. If that debt cannot be met and a charge is outstanding on the lender, that money has to be retrieved somehow. If it is from the borrower, then the borrower becomes liable.

Lord Stoddart of Swindon

My Lords, is not one of the morals of the problem that people buying houses should not be encouraged to take out loans larger than they can manage to repay? Have the Government any advice to mortgage lenders in that regard?

Baroness Blatch

My Lords, there is considerable advice along the lines suggested by the noble Lord. Many of those who have borrowed money to buy homes and are now in difficulty—0.47 per cent. of borrowers—have overextended themselves. That very important advice is given to everybody.

Lord Dean of Beswick

My Lords, in reply to my noble friend Lord Molloy the Minister said that legislation was not required to deal with the situation. Every day 150 owner occupiers have their homes repossessed. Does the Minister understand the devastation felt by those people? They will probably suffer the effects for the rest of their lives. Can the Government give some hope of a scheme to alleviate that suffering and to relieve the terrible burden that those people and their families are expected to bear?

Baroness Blatch

My Lords, the figures are of concern to the Government. For that reason the issue is being addressed. However, context is important. There are 9.4 million people with mortgages. Of those mortgages 0.47 per cent. are in fact the subject of repossession. That is not commensurate with the figure given by the noble Lord. Only 9 per cent. of all homelessness is due to repossessions, again a figure not commensurate with the one given by the noble Lord.

Lord Dean of Beswick

My Lords, I am sorry to intervene again. The noble Baroness says that my figures are not commensurate with hers. That indicates to me that she considers them inaccurate. They are not inaccurate; they are quite specifically correct. The noble Baroness uses a very small percentage of the global figure as a justification that things are all right. Does she not understand that when the unfortunate people who come within that small percentage lose their home the figure becomes 100 per cent. and not 0.4 per cent?

Baroness Blatch

My Lords, I agree with the noble Lord that repossession is a cause of distress to that person. However, a great deal is being done to advise people properly, in particular those who over extend. Only 9 per cent. of homelessness is caused by repossessions. That is the figure that I want to put into perspective. The other figure to keep in perspective is that 98.5 per cent. of people who take out a mortgage are in fact coping.

Lord Cornwallis

My Lords, is the Minister aware that building societies are by no means in the forefront of those seeking repossession of properties? Is she further aware that once the keys have been pushed through a building society's door and surrendered, there is very little that the mortgaging company can do? The people have made themselves homeless. Building societies are doing everything in their power by way of counselling, advice and telephone contact to keep people in their homes by whatever method possible. Can the Minister make clear that the worst thing that people in difficulty can do is voluntarily to surrender their keys?

Baroness Blatch

My Lords, the noble Lord makes a very important point. The worst thing that a person in difficulty can do is surrender the keys. The best thing that they can do is take the earliest possible advice. We know that some people, with all the advice in the world, still seem to get into difficulties. For that reason the Council of Mortgage Lenders has produced a code of practice. We have increased funds to the Citizens Advice Bureaux to help, advise and counsel people in difficulties. Local authorities are also playing a part. I am aware of the work being done by individual building societies. A great deal is being done to help people avoid getting into difficulties in the first place.

The Lord Privy Seal (Lord Waddington)

My Lords, I hope your Lordships will accept that we ought to move on. If we are to limit Question Time to 30 minutes, we must leave some time for the last Question.