Building Society Repossessions (Hansard, 16 July 1998)

§ The Parliamentary Under-Secretary of State, Department of the Environment, Transport and the Regions (Baroness Hayman)
My Lords, figures are not available separately for building societies. The most recent figures for all mortgage lenders are those published by the Council of Mortgage Lenders in January. These show that 32,770 properties, representing 0.31 per cent. of all mortgage loans, were taken into possession in 1997.

§ Lord Dean of Beswick
My Lords, as I understand it—perhaps my noble friend the Minister will correct me if I am wrong—those figures represent a substantial reduction as regards the situation that we faced a short time ago. Although that is very acceptable, should we not keep up our guard on behalf of those people who seem to face interminable increases in their repayments because of the fluctuations in the bank rate? Can my noble friend the Minister tell us whether the Government have any initiatives in mind to help people in such situations in the future?

§ Baroness Hayman
Yes, my Lords. My noble friend is certainly right. This is a great improvement compared with the peak of repossessions which was reached in 1991, when about 75,500 homes were repossessed. The figures have been falling steadily since then, but we are obviously concerned that we still have a legacy from those very dreadful days in the 1990s. That is why the Government have taken action to implement our manifesto commitment to work with mortgage providers to encourage greater provision of flexible mortgages to protect families. My honourable friend the Minister for Local Government and Housing and other colleagues from the Department of Social Security have met the Council of Mortgage Lenders and the Association of British Insurers and asked them to look at ways of improving the quality and coverage of mortgage payment protection insurance for such families.

§ Lord Clark of Kempston
My Lords, does the Minister agree that the seven increases in the bank rate have created tremendous hardship for the many thousands of home owners with mortgages? Discussions with the ABI and the Council of Mortgage Lenders are all very well, but, unless the responsibility for calculating the base rate is taken back by the Chancellor of the Exchequer, those with mortgages will still suffer hardship.

§ Baroness Hayman
My Lords, I do not think that my right honourable friend the Chancellor of the Exchequer is abrogating responsibility in his management of the economy. We have debated the Monetary Policy 377 Committee of the Bank of England, including the specific issue of interest rates, at some length in your Lordships' House. The Government's position on that is well known. It is in the best interests of economic policy that that committee should consider inflation rates. Of course, it takes into account all the evidence when interest rates are set.
The noble Lord raised the issue of the effects of interest rate rises on home owners. Of course there are effects in that respect and we must consider them. However, even with the recent rate increases, it is right to point out that housing remains very affordable by historical standards. I remind the noble Lord that the average mortgage rate is now about 9 per cent., compared with over 15 per cent. at the peak in 1990. Moreover, the payment on a typical mortgage of £55,000 is £260 a month less than it was in 1990.

§ Baroness Ludford
My Lords, does the Minister accept that one of the ways of directly helping mortgage lenders to reduce interest rates would be to join the single currency? Indeed, even a declared intention to do so would probably have a fairly immediate effect in terms of bringing down interest rates and would be a direct financial help to all those with mortgages.

§ Baroness Hayman
My Lords, I congratulate the noble Baroness on her ingenuity in linking commitments on the single currency to a Question on repossessions by building societies. I believe that the Government's position on the single currency has been made very clear in this House and, indeed, in another place.

§ Lord Davies of Oldham
My Lords, what does my noble friend the Minister read into the issue of the distribution of wealth in this country when one has seen in recent years very steep increases in house prices in certain parts of the South-East, and absolutely stationary or even lower levels of house prices in other parts of the country?

§ Baroness Hayman
My Lords, I read many things into those statistics. However, there is one lesson that we must learn both from history and from the geographical differences to which my noble friend referred; namely, that the best help that a government can give to home owners is to ensure a sustainable house market recovery and avoid some of the boom and bust that we saw in the early 1990s—and to do so against a background of a stable and sustainable rate of economic growth and employment opportunities, which will lead to a rise in living standards. Of course, that underpins the Government's economic policy.

§ Baroness Miller of Hendon
My Lords, is the Minister aware that many of the repossessions are due to the existence of the so-called "mortgage guarantee policies", which actually encourage the lender to call in the mortgage and to claim on the insurance rather than enter into negotiations with the borrower for deferred or different terms when he or she has got into difficulties? 378 Can the Minister tell the House what the Government would be prepared to do to try to alleviate the problem for borrowers who run into such difficulties?

§ Baroness Hayman
My Lords, as I believe the noble Baroness is aware, there is government support through the Department of Social Security for certain borrowers who get into difficulties, especially jobseekers, pensioners and the disabled in certain circumstances. However, the noble Baroness rightly pointed out that there are difficulties with existing schemes and methods of financing mortgages. As I said in response to the preliminary Question, that is why we undertook to work with the Council of Mortgage Lenders and the ABI to ensure that there is better protection for borrowers. We are doing so by encouraging lenders to increase the availability of mortgages with flexible repayment arrangements and to improve the quality and take-up of mortgage payment protection insurance. We welcome lenders' commitment to take repossession action only as a last resort. My honourable friend the Minister for Local Government and Housing will be meeting the Council of Mortgage Lenders on 27th July to discuss proposals in more detail.