Part of the debate – in Westminster Hall at 5:02 pm on 23rd October 2017.
It is a pleasure to serve under your chairmanship, Mr Hollobone, and I compliment Paul Scully on obtaining a debate on this petition. I also compliment the 147,307 people who signed it, including 145 people from my constituency of East Lothian. It is a timely petition that was curtailed by the arrival of the general election, so it would be interesting to see how many people would have signed it if it had flowed its entire length.
We are all aware that the financial crash, and indeed the role in the crash of reckless lending on housing in other countries, led to this problem. We are also aware that lenders sought security and safety in the securitisation of those loans, so they did not feel the risk of lending to high-risk borrowers. The result for people today is a tightening in the rules of borrowing and the imposition of affordability tests for mortgages. The link between a poor credit history and an inability to pay a mortgage was made, and in many people’s eyes it has been strongly established.
That brings us to credit reference agencies, which sit at the heart of this problem. We have already heard in a number of speeches about the need for a credit history in order to borrow a mortgage, which is a credit in its own right. In calculating the scoring, the credit reference agencies do not, by and large, take into account rental payments, and therein lies the problem. We have just heard imaginative ideas about how that can be put right, and it is important that we consider them, because the failing, which those who signed the petition are pointing to, is one of removal of choice from individuals.
If we go back a number of generations, the bank manager would have known the person to whom the money was being lent. As we moved forward, that role moved to the assistant bank manager and the lending manager. The process is now controlled by algorithms. Forms are filled in online, or filled in on paper and transferred online, and the decision about whether someone can have a mortgage rests with the algorithmic decision on their credit rating, on any court action and on any previous history that is registered up in the cloud.
The lack of individual input into that process means that many people with a long history of paying rent on time and in full are unable to take advantage of the financial sense that they have demonstrated, perhaps even over decades. We need a system that reintroduces an individual into the process, so that they can look at it. Paying rent is not a credit, but in the mortgage affordability test the payment of rent—weekly, monthly or quarterly—over a long period of time shows that the individual can afford that rent.
There are questions about whether or not prices rise, and about whether or not something catastrophic happens to the house someone is in, so that suddenly the roof needs repairing. However, many people who rent have taken out insurance for their possessions against theft, so to suggest automatically and across the board that those people who have paid their rent are unable to encompass the budgeting needed for a mortgage is a fallacy.
In addressing this matter, we need to reintroduce individual case assessment. It is not beyond the wit of credit reference agencies and mortgage lenders to do that, and they should examine that suggestion. The imaginative ideas that have been proposed can be looked at and developed. However, to write off many people who have such consistent evidence of being able to afford a mortgage, simply because the element of rent is not credit, is disingenuous. I would be grateful to the Minister if he addressed that.