§ Mr. Douglas-Mann
asked the Chancellor of the Exchequer what is his latest estimate of the cost of mortgage interest tax relief for the years 1975–76 and 1976–77, stating the rate of interest on which the estimate is based; and if he will publish similar information for each of the last eight years.
§ Mr. Robert Sheldon
The estimated cost of tax relief on mortgage interest payments for 1975–76 and 1976–77 is £865 million and £1,100 million, respectively. The estimate for 1976–77 takes account of the recently announced increase in the building societies' recommended rate for mortgage loans to 12¼ per cent. These figures relate to interest paid on all qualifying mortgages, and the rate of interest may depend on the source of the loan. For building societies, which represent much the largest proportion in the total, the rate of interest is based on468W the societies' recommended lending rate, which was 11 per cent. for 1975–76 and 10½ per cent. for this year, until the recent increase to 12½ per cent. The figures for earlier years are as follows:
Cost of tax relief on all mortgage loans Average interest rate received by building societies on mortgage loans* … £ million Percentage 1967–68 … 180 7.2 1968–69 … 195 7.5 1969–70 … 235 8.1 1970–71 … 285 8.6 1971–72 … 310 8.6 1972–73 … 365 8.3 1973–74 … 510 9.6 1974–75 … 695 11.1 * Average for nearest corresponding calendar year.
§ Mr. Douglas-Mann
asked the Chancellor of the Exchequer by how much the public sector borrowing requirement would be increased in a full year as a result of the increased tax relief on mortgages and other qualifying loans, respectively, resulting from a 2 per cent. increase in the minimum lending rate.
§ Mr. Robert Sheldon,
pursuant to his reply [Official Report, 18th October 1976, Vol. 917, c. 334], gave the following information:
Changes in mortgage lending rates do not necessarily reflect precisely the changes in minimum lending rate. Assuming however, for illustrative purposes that the recently increased building societies' recommended lending rate of 12¼ per cent. had applied throughout 1976–77, it is estimated that the increased cost of tax relief on mortgage interest in a full year would have amounted to about £150 million. The public sector borrowing requirement would also, of course, be affected by the increased tax liability of lenders as a result of higher interest rates. It is not possible to estimate the increase in tax relief for interest paid on other qualifying loans.