Building Society Mortgages (Interest Rates)

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 27th April 1971.

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Photo of Mr Walter Johnson Mr Walter Johnson , Derby South 12:00 am, 27th April 1971

asked the Chancellor of the Exchequer what is the Government's policy towards the level of interest rates still being charged by the building societies for house mortgages despite two reductions in the Bank Rate.

Photo of Mr John Golding Mr John Golding , Newcastle-under-Lyme

asked the Chancellor of the Exchequer what steps he intends to take to facilitate the reduction of the cost of house mortgages to owner occupiers.

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

The abolition of the stamp duty on mortgages from 1st August, announced in the Budget, will reduce the initial cost of house mortgages. Charges by building societies, including mortgage interest rates, are a matter for the societies concerned.

Photo of Mr Walter Johnson Mr Walter Johnson , Derby South

Is the hon. Gentleman aware that house purchasers feel cheated by the building societies? When Bank Rate goes up, interest rates also go up within a matter of weeks, but when Bank Rate comes down, all sorts of phoney excuses are put up by the building societies for not bringing their interest rates down. Will the Government not act in this matter?

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

The position is as I have described it. There is no direct connection between Bank Rate, which is essentially a short-term rate at which the Bank of England re-discounts bills, and mortgage rates. Mortgage rates are a matter for the building societies. We do not believe that there is a case for Government intervention.

Photo of Mr John Golding Mr John Golding , Newcastle-under-Lyme

Does the hon. Gentleman appreciate that his answer will bring cold comfort to those who already have mortgages on which they have very high repayments indeed? Will he appreciate that they feel cheated by the Government because they were led to believe that interest rates would fall under this Administration?

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

One must take into account the fact that the rates which building societies charge necessarily reflect the rate at which they can borrow. This is an important matter because otherwise, of course, the supply of funds for mortgages would dry up. I do not believe that this is a matter in which the Government should intervene.

Photo of Mr Charles Fletcher-Cooke Mr Charles Fletcher-Cooke , Darwen

Since the law relating to monopolies and restrictive practices now includes services of this sort, would not my hon. Friend consider possibly referring this matter to the Monopolies Commission, if only to allay public anxiety?

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

This is a matter for my right hon. Friend the Secretary of State for Trade and Industry, who will no doubt take note of what my hon. and learned Friend has said.

Photo of Mr Reginald Freeson Mr Reginald Freeson , Willesden East

The hon. Gentleman has said that these matters are solely for the building societies and not for the Government. Is he really telling us that the Treasury has had no consultations jointly with the Department of the Environment and representatives of the building societies about future policy towards house ownership? If he is, will he reconsider and undertake consultations with the Department of the Environment and the Building Societies Association?

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

That is a much broader question. The Question on the Order Paper related specifically to the interest rates which are charged.

Photo of Mr Geoffrey Finsberg Mr Geoffrey Finsberg , Hampstead

Will my hon. Friend accept that not all house owners feel in the same position as hon. Members opposite suggest, and that many of them felt much more cheated by the failure of Lord George-Brown to give them the 3 per cent. mortgages he promised?

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

That may well be so. The memories of hon. Members opposite are conveniently short in this respect.