Repossessions and the Housing Market

Part of Opposition Day — [9th Allotted Day] – in the House of Commons at 2:05 pm on 2 April 2008.

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Photo of Jane Kennedy Jane Kennedy Financial Secretary, HM Treasury 2:05, 2 April 2008

What the hon. Gentleman has said about orders returns me to the point made by Alistair Burt, who rightly spoke of the impact of a change in the way in which the state supported people who faced mortgage and repayment problems. It meant that mortgage lenders had to be far more interactive in their dealings with people. That is exactly what happens. A court order does not necessarily mean that individuals lose their homes, and banks and building societies now try much harder to use repossessions as a last resort when dealing with people in financial difficulties. Indeed, the regulatory regime requires them to do so.

As I have said, both interest rates and mortgage rates are far lower today than they were at the start of the last decade, and have increased more gradually than they did then. I do not think it reasonable to compare the present position of the United Kingdom housing market with the position in the early 1990s. I also do not agree with the comparisons drawn by the hon. Member for Twickenham with the United States, where house prices are experiencing significant falls. In fact, there are three reasons to believe that the UK market is better placed than that in the United States.

First, the falls in US housing prices are being driven by a very large overhang of unsold houses. Here in the UK, by contrast, housing supply is not currently meeting demand. That is why we have a target of more than 240,000 net additional homes a year by 2016. We intend to deliver 2 million new homes by 2016, and 3 million by 2020. Secondly, mortgage lending regulation is stricter in the UK than it is in the US. Many of the regulatory changes suggested in response to the problems in the US market have already been made in Britain. Thirdly, although it is generally accepted that the UK also has a sub-prime mortgage sector, it is much smaller than that in America, where it was seen as the trigger of the current difficulties.

The Government have taken a number of steps to help ensure that lenders lend responsibly and borrowers can make informed choices, including the statutory regulation introduced in 2004. The FSA's regime places specific requirements on firms to take account of the affordability of loans, and to treat customers fairly. Like the hon. Member for Twickenham, we welcome the recent statement from the Council of Mortgage Lenders setting out the steps that the industry is taking to support borrowers who are experiencing difficulties. They include working with debt advisers, proactive identification of at-risk borrowers, and considering repossession only as a last resort.

More generally, the Government have been focusing increasingly on improving people's financial capability so that they can make better decisions about how to handle their money. For the long term, we have put aside £11.5 million for personal finance education in schools over the next three years. That will include developing ways of helping primary school pupils to start thinking about money, using their child trust funds to make it relevant to them. From September this year, financial education will also be part of the secondary school curriculum.

We must think about today's adults as well. Otto Thoresen has been considering the best way in which to ensure that everyone in the country can obtain free, impartial, high-quality advice on money when they need such information. His final report, published earlier this month, recommended a pathfinder project to test the best ways of offering that, and, with the FSA, we have agreed to provide up to £12 million to run it over the next year.