Mortgage Costs and Housing

Part of Opposition Day – in the House of Commons at 3:39 pm on 13th December 1989.

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Photo of Mr Bryan Gould Mr Bryan Gould , Dagenham 3:39 pm, 13th December 1989

I beg to move, That this House condemns the Government's responsibility for the growing housing crisis; deplores the rise in mortgage interest rates which has destroyed family budgets, cost some their homes and placed home ownership beyond the reach of others; warns that Government-inspired increases in council rents above the rate of inflation will cause hardship to many low-income people; deplores the Government's failure to maintain the condition of the housing stock and the consequent shortage of affordable housing; and believes that the scandal of growing homelessness is just the most visible sign of a wider housing failure. Of all the mistakes made by the Government, and there have been many, none is more resented, none is more painfully felt and none is more likely to cost the Government support than the steep and sustained increase in interest rates․a rise which in itself is an admission of economic failure and is a sign of desperation in the pursuit of economic policy, and a rise which has its most immediate effect, and does its most immediate damage, in its impact on mortgage rates.

The anger and resentment that that has caused are not just the result of the damage that it has done to family budgets, although that is real enough. Average monthly repayments for the country as a whole since May 1988 have risen from £259 to £347, an increase of no less than £88 per month. In London, the figures are even worse, because they reflect a rise of £162 per month. Increases of that magnitude will have shattered even the most careful of household budgets and will have plunged thousands of families into the most desperate of financial plights.

But the anger and resentment arise not just on that account, nor just because, for a tragic minority, the increase has meant the shock, despair and humiliation of losing their homes. In the first half of this year there were 6,350 building society repossessions. There is precious little comfort to be gained from the fact that that high figure represents a small decrease from the even higher figure of the earlier year or two; little comfort because the lower figure reflects the fact that building societies are playing a somewhat smaller proportionate part in the provision of mortgage lending, and even less comfort because, in prospect, the outlook is much grimmer.

Already we see the volume of mortgage arrears growing fast. In June this year, no fewer than 45,100 mortgages were between six and 12 months in arrears, which represented a jump of more than 20 per cent. What is already a grim reality for many people is rapidly becoming a frightening prospect for many more.

But the true reason for the widespread resentment and anger is the sense of betrayal felt by many thousands of people who recall that they were enticed on to that treadmill of spiralling house prices, of ever-rising mortgage repayments, by a Government who told them that we were enjoying an economic miracle; a Government who made them glib promises to the effect that home ownership was a risk-free one-way bet; but a Government who, with equal irresponsibility, threw everything into reverse when their own mistakes caught up with them and then blamed the victims of those mistakes for being so easily duped.

It is the Government's heartlessness, their almost moralistic zeal in turning the screw, which has added insult to injury, and it is that which has created mortgage misery for millions. In case anybody thinks that that easy alliteration conceals nothing much, let us be clear that it conceals a true degree of desperation. It is that desperation which has made home ownership an impossible dream for some and an impossible nightmare for many more.

It is not just mortgage payers who are suffering. Tenants, too, find that their housing costs are going up sharply. It is not surprising that tenants feel somewhat aggrieved at what they consider to be the excessive attention paid to the interests of mortgage payers. They, too, find that housing costs are rising inexorably against them. Council tenants have been put on notice by Ministers․including the Secretary of State․that the Government intend to force their rents up to near market levels. The new subsidy arrangements and the ring-fencing provisions of the Local Government and Housing Act 1989 mean that the Government now have the power to make their writ run, whatever local democracy may require or suggest. Council rents are set to rise much higher than the inflation rate, often against the wishes of local authorities and almost always against the interests of some of the lowest-income families in our society.

At the same time, private sector rents will also rise sharply. The Housing Act 1988, which allows market rents to be charged in place of fair rents and reduces security of tenure, is just beginning to have its malign effect. What that will mean in terms of affordable housing is clearly shown by a survey commissioned by the Department of the Environment and carried out by Price Waterhouse, which was published in August. It shows that a married couple with two children and an income above the qualifying level for housing benefit would be able to afford a market rent for a two-bedroomed house in only two cities in the country․Leicester and Newcastle. For the rest, market rents will mean that private rented accommodation is placed beyond their reach. That is a prime instance of the futility of looking to the market to meet unmet housing needs.

Even housing associations, which are now looked to by the Government as the instrument of salvation, will find that their rents will rise as they are forced to turn to private sector funding. It is little wonder that over the past year housing association rents have risen by no less than 24 per cent.