Mortgage Defaults: Repossessions (Hansard, 11 March 1991)

§ Baroness Fisher of Rednal
My Lords, at the request of my noble friend Lady Hollis of Heigham, I beg leave to ask the Question standing in her name on the Order Paper. The Question is to ask Her Majesty's Government:
What steps they will take to reduce the number of houses repossessed because of mortgage default, and what help they will give to families made homeless through repossession.

§ The Parliamentary Under-Secretary of State, Department of the Environment (Baroness Blatch)
My Lords, it is lending institutions which decide the circumstances in which to possess properties in the event of mortgage default. Her Majesty's Government continue to discuss this with the Council of Mortgage Lenders. However, it is local housing authorities which have statutory responsibility for dealing with homeless persons and we are currently revising the code of guidance for them.

§ Baroness Fisher of Rednal
My Lords, can the noble Baroness tell me whether she expects any help from housing associations, which hope to build 20,000 additional dwellings this year?

§ Baroness Blatch
My Lords, that question is very wide of the Question on the Order Paper. The Question on the Order Paper is to do with repossessions and what is being done about housing the homeless.

§ Baroness Fisher of Rednal
My Lords, with all due respect to the noble Baroness, I should have thought 2 —perhaps she will correct me if I am wrong —that housing associations were supposed to be helping the local authorities with the problems of homelessness. The local authorities cannot take on all the responsibility themselves. I thought that they worked in co-operation with one another.

§ Baroness Blatch
My Lords, the noble Baroness is absolutely right in the sense that there has to be co-ordination right across the statutory and voluntary sectors. The amount of money made available to the Housing Corporation, which is then made available to the housing associations, has been increased and will in any case continue to be increased for the next three years. The issue needs to be seen in context. Out of 9.4 million mortgages, only 0.47 per cent. of them are the subject of repossession. Only 9 per cent. of all homelessness occurs as a result of default in mortgage payments.

§ Lord Stoddart of Swindon
My Lords, would not the best way to assist people who are having their houses repossessed be to have an early and substantial reduction in the interest rate?

§ Baroness Blatch
My Lords, the Government's record on reducing interest rates is a good one: a I per cent. reduction in November, a 0.5 per cent. reduction at the beginning of February and a further 0.5 per cent. at the end of February. Inflation is coming down, with a promise of more reductions.

§ Lord Jay
My Lords, has the noble Baroness noticed that a growing number of council tenants who had absolute security as such and were then persuaded by government propaganda to buy their houses are now finding them repossessed and are facing eviction from what they thought were their family homes?

§ Baroness Blatch
My Lords, some of the 43,800 repossessed houses will undoubtedly be those of council house dwellers who bought their homes. But it has to be said that a large number of people who bought their council homes are not in difficulties and are enjoying the benefits of becoming home owners. Considerable help is available for people at the very 3 bottom of the income scale in that up to half the interest on their mortgage repayments can be met for 16 weeks and the full amount for as long as is necessary thereafter. Therefore, the real difficulties are for people who are above that level who will require help to bridge the difficult times before the advent of the easier times which we hope are to follow.

§ Lord Stallard
My Lords, does the noble Baroness accept that some of the responsibility for these problems must lie with the lending agencies? The banks and the building societies have been cajoling and pestering these vulnerable and desperate people for years to borrow much more than they can afford. Most of us foresaw the difficulties that would occur. But these experts, despite the fact that they must have foreseen the same problem, carried on and forced people to borrow much more than they could afford to pay back. Is it not time to sit down with the lending agencies to discuss how they can now help those people to get out of the mess which the agencies themselves helped them to get into?

§ Baroness Blatch
My Lords, I said when answering a Question only a week ago that the group of people who most overextended themselves when buying homes were accountants, who ought to have known better. The lending institutions have done a great deal. They have implored people who find themselves in difficulty to come forward at the earliest possible opportunity to receive advice and counselling. The lending institutions have produced a code of practice which goes a long way towards assisting people, if only those people make sure that they notify their difficulties early.

§ Lord Stallard
My Lords, perhaps I may return on one point. Will the noble Baroness accept the example of somebody who was cajoled into taking a 90 per cent. mortgage, having applied for a 100 per cent. mortgage? The building society may have said, "We can give you only 90 per cent., but if you take out an insurance policy with somebody like the Prudential it will cover the other 10 per cent.". If that person then gets into difficulties the house may be repossessed. Is the noble Baroness aware that in those circumstances the Prudential or the insurance company responsible may then ask for more money? People are not told that that could happen in the event of difficulties arising. There is a fault somewhere and I put it right at the feet of the lending agencies.

§ Baroness Blatch
My Lords, there must be some individual responsibility when people take out a loan. However, it is not in the interests of any lending institution, particularly the building societies, to incorporate too high a risk in terms of the mortgage going by default. It is greatly in the interests of the lending authority to make sure that the loan is repaid.

§ Lord Cornwallis
My Lords, does the Minister agree that prevention is better than cure? What actions, if any, are the Government taking to curb the irresponsible advertising of so-called free credit? Will they explain to people who take out such credit the liabilities into which they are entering? I am sure the Minister is aware that it is probable that the 4 underlying cause of repossession more often than not is irresponsible borrowing of another kind, not the mortgage.

§ Baroness Blatch
My Lords, I find it easy to agree with that point. Very often the problem is the multiplicity of debts. The noble Lord asked what the Government are doing. We have increased the grant to citizens' advice bureaux by £11 million so that they can advise and counsel people against the situation highlighted by the noble Lord. However, he made an important point not so much about the advertising of free credit but about those rather more unscrupulous moneylenders who offer almost free money. That becomes an attractive proposition for somebody who has difficulties. I shall take that message back to my right honourable friend.

§ Lord Hailsham of Saint Marylebone
My Lords, is it not a wise precaution for those who wish to take out a mortgage for the purpose of buying property to consult a solicitor as to their ability to repay?

§ Baroness Blatch
My Lords, it is certainly wise to take as much advice as possible when embarking upon a loan as extensive as that needed to buy a home.

§ Lord Tordoff
My Lords, in the multiplicity of debts to which the noble Baroness referred, does she include the poll tax?

§ Baroness Blatch
My Lords, I am talking about any debt.

Lord Bruce of Donington
My Lords, is the noble Baroness aware that the more the population gets into debt, the more the Government like it?

§ Baroness Blatch
My Lords, I disagree profoundly with what the noble Lord has just said. It is extremely important to get the matter in perspective: 98.5 per cent. of people suffer no difficulty in paying for their mortgages and coping with the loan. We are talking about 0.47 per cent. being subject to repossession. However difficult that may be, it must be seen in perspective.

§ Lord Strabolgi
My Lords, does the 0.47 per cent. include the number of people who are from six months to one year in arrears? That is thought to total about 80,000 people who will soon have to be added to the figure of 40,000 that the noble Baroness gave to the House. Is she aware that the problem will not go away but will increase?

§ Baroness Blatch
No, my Lords, the figure I mentioned includes them. The 1.5 per cent. includes all repossessions and those with difficulties over six months and 12 months. The 98.5 per cent. are people who are coping with their loans.

§ Lord Dean of Beswick
My Lords, in her Answer to me last Monday the Minister said —and I checked this in Hansard —that between January and September last year nearly 10,000 families of the total who were dispossessed were accommodated by local authorities. I take it that that was in the present housing stock. There are now 1 million fewer council houses available for letting and the building programme for local authorities is almost non-existent. Is it not time, therefore, that the Government reviewed their policy 5 of local authorities being merely enablers? The Government should allow them increased access to their capital assets in order to build more low-cost houses for rent and to help the other people who will surely become homeless in the near future, as indicated by the noble Lord, Lord Strabolgi.

Baroness Watch
My Lords, there is a fundamental policy and philosophical difference between the noble Lord and the Government on the issue. The Government do not believe that the local authorities should be primary providers of homes. That should be done by the housing corporations, through housing associations and much of the voluntary sector, in addition to the local authorities. Therefore, the figure one should consider is the total number of homes being made available to people on low incomes.