Mortgage Arrears and Repossessions (Hansard, 26 June 1995)

§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)
My Lords, our proposals for changes to the rules on income support help with mortgage interest payments will encourage the development of comprehensive, quality insurance. That will provide all home owners with the opportunity to protect themselves against the threat of repossession, and not only the 30 per cent. who may be eligible for income support.

§ Lord Jay
My Lords, since many thousands of families who had absolute security as council tenants were induced by government propaganda to buy their homes and now find themselves unable to meet their mortgage dues, partly due to the Government's high interest rate policy, and are threatened with repossession, is there not a strong moral case, with repossessions still running at about 1,000 a week, for the Government to give some effective relief to those in that situation, particularly the unemployed?

§ Lord Mackay of Ardbrecknish
My Lords, as I explained in my original Answer to the noble Lord, the steps that the Government propose to take will. we believe, provide the opportunity for everyone to be 525 covered, not only those persons who become redundant and are eligible for income support. Something like 70 per cent. of the people whose homes have been repossessed do not receive income support. Therefore, if the noble Lord is looking for help he is looking in the wrong place. The real place to look for help is insurance, and the lower interest rates brought about over the past four or five years by the sensible, stable policies of this Government.

§ Baroness Hollis of Heigham
My Lords, in his reply to my noble friend, the Minister made much of mortgage protection policies and said that everyone would be covered. Will he confirm that the Department of the Environment's latest research on mortgage arrears and repossessions shows that half of those on income support currently having mortgage payments made for them could not have obtained mortgage protection policies? They would have been without cover. Will he also confirm that, as the research shows, of those who had mortgage protection policies two-thirds of the claims were unsuccessful? Does that not suggest that far from mortgage protection policies covering everyone, as the Minister said, they will do little or nothing to prevent repossessions? They are merely a paper policy.

§ Lord Mackay of Ardbrecknish
My Lords, I am afraid that I cannot agree with the noble Baroness, which I do not suppose will surprise her. The Government, lenders and insurers are currently working together to ensure that the policies which are coming on stream—and a great many are coming on stream via the building societies themselves as well as the insurance companies—will do the job of giving people cover. Two-thirds of all home owners do not qualify for income support if they become unemployed. Therefore, our proposals will help to bring cover to that two-thirds as well as to the other one-third.

§ Lord Stoddart of Swindon
My Lords, does the Minister understand that the devastating crisis in which the Conservative Party finds itself at present is largely due to its policy on housing and indeed its policy of undermining the family? That has been achieved in three ways: by the reduction of mortgage income tax relief from 25 per cent. to 15 per cent.; with the same consideration as regards the married man's allowance; and the 8 per cent. increase on domestic fuel. In the circumstances in which the Conservative Party now finds itself, will the Government re-examine their policy to deal with those issues?

§ Lord Mackay of Ardbrecknish
My Lords, I shall not take lessons from Members of the party opposite about encouraging home ownership. After all, from 1979 on, the party opposite consistently opposed the selling of council houses, although, like its recent U-turn on education policy, I believe that it has now decided that we were right all along. With regard to mortgages and what we are doing, even at the reduced rate now in place the MIRAS help for an average mortgage payer comes to about £360 a year and costs the Treasury £3 billion a year. My understanding is that at least some people in the party opposite want to abandon that relief altogether. New housing is very affordable. Indeed last year about ½ million new first-time buyers entered the market. That is a sign that people still believe that buying a house is a good bargain.

§ Lord Haskel
My Lords, is the Minister aware that as recently as last month it was estimated that insurance will cost some £22 a month, plus insurance premium tax? How can people already in great difficulties over their mortgage afford that sum?

§ Lord Mackay of Ardbrecknish
My Lords, the Government's major proposal affects only new borrowers and only for the first nine months. But—and this is a point that the Opposition manage to ignore on all occasions that the matter is discussed—after nine months state help will trigger in again. We are talking about the first nine months.
Building societies up and down the country—even those most vociferous in their opposition—are now beginning to offer policies. The policies vary from the free redundancy protection cover offered by the Skipton Building Society, through the Halifax Building Society which offers £6.90 per £100, and higher. Looking slightly wider, General Accident offers to average borrowers costs as low as £4 per £100.

§ Lord Stallard
My Lords, will the Minister think again about his reference to the buying and selling of council houses? Most of the opposition was centred around the fact that it should be left to local authorities, bearing in mind the number of houses that would be taken out of local authorities' control and out of rented control? Have the concerns of the local authorities not been borne out? The lack of affordable rented houses is the biggest problem in the housing market today. It has been caused by reducing the stock base by the sale of so many ordinary rented houses.

§ Lord Mackay of Ardbrecknish
My Lords, it appears that I was wrong in thinking that the Labour Party had reversed its policy. I am afraid to tell the noble Lord that I remember the opposition to the policy when I was a Member of another place, as he was at the time. That opposition did not seem to have any qualification. The Labour Party was simply opposed to the sale of council houses. But selling a council house does not remove it from the housing market. The people remain in the house; they buy the house. If they sell it on, someone else buys it. The house remains inhabited by some family or another.

§ Baroness Hollis of Heigham
My Lords, why have the Government not allowed local authorities to recycle the proceeds of the sales to ensure additional housing to meet the needs of those who can afford only to rent?

§ Lord Mackay of Ardbrecknish
My Lords, we have gone a little wide of the Question to matters pertaining more to the Treasury. However, I am happy to answer, as I have done before. The issue relates to the amount of capital money that local authorities can spend in order to keep the economic position under control—to keep public spending under control—so that we have the kind of economic results that we have watched over the past four to five years.

§ Lord Stoddart of Swindon
My Lords, the noble Lord accused me of being against owner occupiers. Is he aware that when I was the leader of the Reading County Borough Council and chairman of its housing committee, not only did I arrange that people should have houses to rent. we 527 also built houses for sale. We sold council houses and had a first-class mortgage scheme to help those who wished to buy their houses. The scheme was second to none in the country. In the light of my personal record, will the noble Lord please withdraw his accusation?

§ Lord Mackay of Ardbrecknish
My Lords, I was talking about the policy of selling council houses. That policy was greatly opposed in the 1979 Parliament. But I am happy to accept that the noble Lord subscribes to some of the principles of the Conservative Party. I wonder how long it will take him to make the second move-he has made his first move towards the Liberal Benches—to come and join us.

§ Lord Monkswell
My Lords, the Government stated that home owners who are unemployed and therefore cannot meet their mortgage obligations will receive government support after nine months. The Jobseekers Bill provides unemployment benefit for six months only. Thereafter those people who remain unemployed will have to obtain income support. If a householder does not wish to trust the insurance company and decides to save money against the possibility of unemployment, what will his situation be if his savings effectively take him above income support rules? Under the Government's new proposals in the Jobseekers Bill, he will not receive income support for those three months between the end of unemployment benefit and the receipt of income support after nine months.

§ Lord Mackay of Ardbrecknish
My Lords, under the Government's proposals we would expect new borrowers to cover themselves for the first nine months. In the case illustrated by the noble Lord, there would be unemployment benefit for the first six months and then three months of the equivalent of income support, although the terms have changed. Thereafter the income support mortgage interest will trigger in if necessary. However, the noble Lord makes a valid point. People may not be eligible for income support because they have savings, their partner works, their spouse works or something else like that. That is why I said that two-thirds of people who own their own homes are not eligible for income support if they become unemployed; hence the need to encourage insurance cover.

§ Lord Peyton of Yeovil
My Lords, is my noble friend aware that he deserves the warm congratulations of the whole House on having located the interrogative in the last supplementary?