§ Mr. Spearingasked the Secretary of State for the Environment whether he has any proposals to change the current limitation on building society lending.
§ Mr. ShoreBecause of concern about a continuing acceleration in the rate of 255W increase in house prices the Building Societies Association—BSA—agreed in March to a reduction in the previously agreed level of guideline lending for house purchase from £680 million a month to £610 million a month—excluding lending for peripheral purposes such as home improvement—for the period April-June 1978. The moderation in levels was designed to prevent the volume of building society lending, which had been at very high levels in the previous six months, from fuelling a house price explosion.
There are now the first signs that the rate of increase may be abating, although these are by no means conclusive. Consequently, although it would be premature to return immediately to a greatly-increased level of lending, the Government and the BSA have now agreed that in the third quarter of 1978 it would be right to plan a controlled increase in lending levels. It has therefore been decided that in the months July. August, and September the guideline level of lending for house purchase should be £640 million a month. If there is then positive evidence that the rate of increase in house prices is slowing down, it should be possible to plan for a further increase by the end of the year. The Joint Advisory Committee on Mortgage Finance will continue to monitor lending levels and prices on a monthly basis, and will recommend further adjustments as and when necessary.
In the view of the Government and the BSA, this adjustment to lending levels will not put pressure on house prices. And it will give some assistance to the house-building industry.