Mortgage Arrears (Hansard, 13 July 1992)

The Minister of State, Department of Transport (The Earl of Caithness)
My Lords, according to the latest figures from the Council of Mortgage Lenders, around 275,000 borrowers (or 2.8 per cent. of the total) had mortgage arrears of six months or more at the end of 1991. My right honourable friends the Chancellor of the Exchequer and Secretary of State 2 for the Environment met the lenders on 2nd June to discuss progress on the package of measures they had agreed last December. They were encouraged to hear the lenders' assessment that those measures will prevent some 55,000 repossessions this year.

§ Lord Dean of Beswick
My Lords, I am grateful for the information given by the Minister. However, is he aware that if the dates are moved slightly the figures look quite different? For example, between March 1991 and March 1992 the number of repossessions increased from 47,940 to 68,000, which is a 40 per cent. increase. The number of borrowers who are six months in arrears increased in the same period from 209,000 to 290,000, which is an increase of nearly 33.3 per cent. Those figures emerge from a survey carried out by Shelter for the Rowntree Trust. Although what the Government are doing is welcome, do they not need to do a lot more to prevent the disaster which is looming in the owner-occupied sector?

The Earl of Caithness
My Lords, I shall be able to update the noble Lord, Lord Dean, on the latest figures to be published in August, which refer to the first half of 1992.

§ Lord Stallard
My Lords, perhaps I may bring the noble Earl up to date, not in terms of telephone numbers but by using ordinary statistics. Is he aware that for the first three months of this year repossessions were running at the rate of 144 per day? Is he aware further that since the introduction of the much-heralded mortgage rescue scheme last December only 12 rescues have taken place? How does he square that with the 55,000 expected this year? He will have to rescue a lot of people to bring up the numbers from 12 to 55,000. Is it not time that we had a look at the whole scheme and all the arrangements and problems in this sphere to see whether we can find a workable scheme—and there are quite a number of suggestions which will enable those people to stay in their own homes, either as tenants or as part owners?

The Earl of Caithness
My Lords, that is exactly what the package of measures which my right 3 honourable friends and the Council of Mortgage Lenders agreed in December. The noble Lord, Lord Stallard, has taken only one aspect of the scheme. It is true that formal rescue deals have been concluded with only a small number of borrowers, but negotiations are continuing. I ask the noble Lord to look more widely at the whole package of measures because that is what will lead to the prevention of some 55,000 repossessions this year.

§ Lord Elton
My Lords, while accepting that those figures in large part stem from the current economic condition in the world generally, and in this country in particular, does my noble friend accept that another important ingredient is the lack of understanding which many people have in their early years about the proper management of debt and the danger of accepting too much in the way of credit? Does my noble friend agree that efforts should be strengthened in schools to give some training in that regard in advance of adult life?

The Earl of Caithness
My Lords, all our children should be brought up to be made aware of the question of debt and the value of saving. The Council of Mortgage Lenders has been keen to discuss debt management with home owners who are finding it difficult to pay their mortgages.

§ Baroness Fisher of Rednal
My Lords, is it not the fact that those who are unemployed cannot possibly afford to pay their mortgages? Those people are in dire circumstances; not only are they losing their homes but they are losing their jobs. Local authorities cannot pick up those people. Are the Government aware of where they are disappearing to?

The Earl of Caithness
My Lords, considerable efforts are being made by the Council of Mortgage Lenders to prevent exactly the situation referred to by the noble Baroness of people being repossessed. That is the reason that it is making such efforts.

§ Lord Shepherd
My Lords, does not the noble Earl agree that it would be wrong for us to leave this House believing that those people who sought to buy their homes through mortgages do not know how to manage their debt? Does not the noble Earl agree that for a long time we have been seeking to encourage people to buy their own homes? The only way that they can do that is through a mortgage. Is not a mortgage, properly managed, a form of compulsory saving?

The Earl of Caithness
My Lords, not only have we encouraged people to buy their own homes but we shall continue to do so. However, they must borrow prudently.

§ Lord Peston
My Lords, it is a little late for the building societies to tell people to borrow prudently when until recently they were telling them to borrow as imprudently as they possibly could. Is the noble Earl aware that, given the extent to which house prices have fallen, a great number of people have mortgages larger than the value of their homes? Some 4 economists, mostly those sympathetic with the Government, believe that that position is so dangerous that it may lead us further into a slump unless the Government intervene.

The Earl of Caithness
My Lords, we are aware that some people are in the position of being in "negative equity", to use the phrase of the economists. The Council of Mortgage Lenders states that the number is around 375,000, which is far fewer than many have suggested.

§ Lord Mackie of Benshie
My Lords, does the noble Earl possess any figures in regard to the cost to public funds of rehousing people who are dispossessed of their homes?

The Earl of Caithness
No, my Lords.