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Housing Market

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 12th November 1992.

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Photo of Alan Duncan Alan Duncan , Rutland and Melton 12:00 am, 12th November 1992

To ask the Chancellor of the Exchequer what steps he has taken to assist the housing market; and if he will make a statement.

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

A package of measures was implemented to reduce the number of repossessions. I also announced recently two measures—top-up loans and security substitution—to help borrowers with negative equity. The fall in mortgage interest rates should bring relief and help stimulate a revival of confidence in the housing market.

Photo of Alan Duncan Alan Duncan , Rutland and Melton

I am grateful for that answer because the problem of negative equity is simply that, more often than not, people cannot move house even if they have a willing buyer. As it does not worsen the risk position of the lender in any way if a borrower moves into a similar house, will my hon. Friend put as much pressure as possible on lending institutions to allow people to move within the new guidelines? That would inject much-needed activity into that sector of the housing market.

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

I agree with my hon. Friend. I acknowledge that negative equity can be a problem for some borowers. [Interruption.] For some borrowers, yes; for others, it is not a problem. The Bank of England recently estimated that up to 1 million people may find themselves with negative equity. I hope that the two measures that I have announced will help tens of thousands of negative equity borrowers. However, it will require the assistance of the building societies and their schemes. I hope that they will heed my hon. Friend's words.

Photo of Lynne Jones Lynne Jones , Birmingham, Selly Oak

Will the Minister consider making capital financing available, through either the borrowing allocation or the use of capital receipts, so that local authorities and housing associations can help people trapped by negative equity to buy houses that are empty, under do-it-yourself or other shared ownership schemes?

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

Even under existing spending plans, it is anticipated that by the middle of the 1990s housing associations will spend about £2 billion a year; so a considerable commitment has already been made. I ask the hon. Lady to await the statement that my right hon. Friend the Chancellor of the Exchequer will make later.

Photo of Mr John Watts Mr John Watts , Slough

Is my hon. Friend satisfied that mortgage lenders are as quick to pass on reductions in base rates as they are to pass on increases in base rates?

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

I hear what my hon. Friend says, as will the building societies. Of course, the building societies also consider the competitive interest rates offered by other savings products. I, too, am mindful of that when influencing the rate of national savings products. I hope that the building societies will heed what my hon. Friend says if there are any further reductions in interest rates. Their alacrity in passing on reductions to borrowers will be welcome.

Photo of Harriet Harman Harriet Harman Shadow Chief Secretary to the Treasury

Given that the Government's policies have left 60,000 families homeless, 400,000 construction workers on the dole and 1·5 million families in houses that are worth less than their mortgage, does the Minister recognise the failure of the Government's policies? Does he recognise that the housing market will not pick up until the economy recovers? It is because the Government have no policies for recovery of the economy that the housing market continues to look gloomy.

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

I acknowledge that the housing market has gone through a difficult period, as has the construction industry. However, to listen to the hon. Lady, one would think that there was no good news on the scene at all. Indeed, the good news is welcome. For example, there was strong growth in housing transactions in the third quarter of this year and a significant drop in the number of repossessions in the first half of this year. The affordability of homes for first-time buyers is extremely good. We do not want to fuel house price inflation and have the sort of housing boom that put housing beyond the reach of ordinary people and first-time buyers.

Photo of Mr William Powell Mr William Powell , Corby

Is my hon. Friend aware that a significant part of the problems in the housing sector has arisen as a result of negative equity in home income plans? Is he aware that all right hon. and hon. Members have constituents who have been adversely affected by the lending institutions' refusal to come to terms with some of the ruthless consequences of the sale of such plans? One of my constituents committed suicide because of it. Will my hon. Friend take a more active stance than hitherto in trying to bring the building societies and others to realise that they must solve the problems?

Photo of Mr Anthony Nelson Mr Anthony Nelson , Chichester

I share the sentiments expressed by my hon. Friend, and I know that they are shared by hon. Members on both sides of the House. The Government, too, have been concerned by the marketing of some of the home income plans—I replied in a debate on the issue in the House recently. The problem has been largely resolved for the future, but many people have still lost out in the meantime. That is why I welcome the fact that the Financial Intermediaries, Managers and Brokers Regulatory Organisation has set up a one-stop shop to try to resolve some of the problems. Again, that will require the assistance of the building societies and other lenders, which I hope will be forthcoming.