HL Deb 07 February 1995 vol 561 cc101-2

2.51 p.m.

Lord Dean of Beswick asked Her Majesty's Government:

Whether they share the concerns expressed by the Council of Mortgage Lenders over the effects of the recently announced changes to the provision of income support to mortgage holders who become unemployed.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)

My Lords, we are discussing the proposed changes in income support mortgage interest with the Council of Mortgage Lenders. We believe that those measures will result in better protection for all home owners, not just those who are currently able to claim income support mortgage interest. Currently 150,000 unemployed home owners receive no help from income support mortgage interest. They would be helped by comprehensive good quality insurance.

Lord Dean of Beswick

My Lords, I am grateful to the Minister for that reply. However, he must be aware that, despite the improvements and the falling numbers of families whose homes are being repossessed, almost 1,000 families a week are having their homes repossessed by building societies. As the Minister will be aware, that figure was reducing slowly. That is welcome, but is he also aware that in its report the Council of Mortgage Lenders issued a warning? It believes that the figure will bottom out and start to swing upwards again, with the adverse effect that that will have on housing and the building industry too.

Lord Mackay of Ardbrecknish

My Lords, in a different way the noble Lord has made a similar point to one that I made in my original Answer. Two-thirds of all home owners would not qualify for income support if they became unemployed because they have capital, income or a working spouse. Therefore the expansion of insurance products so that an increasing number of people with mortgages had insurance would reduce the need for building societies to repossess people's homes.

Baroness Hollis of Heigham

My Lords, the Council of Mortgage Lenders has prophesied that government measures will produce between 12,000 and 24,000 further repossessions, with the cost and misery that will result. Do the Government accept responsibility for that?

Lord Mackay of Ardbrecknish

My Lords, the Government do not accept responsibility. Indeed, we do not agree with the Council of Mortgage Lenders on that. We believe that, as those insurance policies come into play with new borrowers, those who are unemployed, or who in any other way find that they are unable to repay the mortgage covered by insurance, will have the insurance company to help them.

It is worth making the point to your Lordships that we expect people to insure themselves for the first nine months. Thereafter income support mortgage interest will come into play.

Lord Desai

My Lords, are the Government satisfied that user friendly insurance products exist, or do they simply hope that the market will take care of the matter? Is it not time that the Government encouraged the creation of suitable insurance products with appropriate subsidies?

Lord Mackay of Ardbrecknish

My Lords, by the policy of removing mortgage interest help for the first nine months on income support, we are concentrating the minds of both borrowers and lenders on the need to take out insurance. Indeed the Abbey National tells us now that 40 per cent. of new borrowers already take out insurance. There is little doubt that, since we made the announcement, more and more insurance companies, including most recently General Accident, have come to the market with policies.

Lord Dean of Beswick

My Lords, the Minister sought to answer a difficult Question fully. However, at the end of the argument the people in the greatest danger of immediate repossession are those who do not have the funding to insure. Those are the people at peril of being made homeless. Could not something be done about that as a matter of urgency?

Lord Mackay of Ardbrecknish

My Lords, the policy regarding the first nine months without income support triggering in refers to new borrowers. The provision in relation to the first nine months will not affect people who are currently borrowers. All persons who take out a mortgage after that policy comes into force will have to ask themselves whether or not they should take out a policy of the kind which is increasingly available in the market place in order to cover themselves not just for unemployment but for sickness and the like.