| Previous Section | Index | Home Page |
7.26 pm
The Economic Secretary to the Treasury (Miss Melanie Johnson): I congratulate my hon. Friend the Member for Croydon, Central (Mr. Davies) on securing the last Adjournment debate of the century and the last item of business to be carried out in the House in this millennium. I am somewhat humbled to be the last Minister to speak in a debate in the House of Commons this century, bearing in mind all the momentous occasions that this great debating Chamber has seen over the years.
Looking back to the beginning of the century, I note that when Parliament returned from its Christmas break on 30 January 1900, it was to hear--astonishingly--the 63rd Address of Her Majesty Queen Victoria, who spoke on hostilities in South Africa at the time.
The first Member of Parliament to speak in the House that day was Captain Prettyman, who had been in the Royal Artillery and was the Member of Parliament for Suffolk, Woodbridge between 1895 and 1906. As a military man, his main focus as a mover of the Address was in supporting our troops in South Africa. He also defended the artillery from criticism that their field guns were not as effective as the enemy's. On the home front, which is highly relevant to the debate, Captain Prettyman supported the remodelling of the prevailing Companies Act to stop people being induced to part with their money under false pretences--plus ca change, as they say.
Like my hon. Friend the Member for Croydon, Central, I was concerned to read of the cases highlighted in the National Association of Citizens Advice Bureaux report, "The Long Shadow". Before I deal with the matters to which my hon. Friend referred, it may be helpful if I set them in context.
At the end of 1996--the latest figures available--there were 16 million owner-occupied houses in Britain, some 67 per cent. of the housing stock. That shows the huge strides in prosperity that the UK has enjoyed in the 20th century. At the end of 1998, there were 10.9 million mortgages in place. Of those, only about 230,000 were in arrears, which represents about 2 per cent. of the total, and 35,000 of them had been in arrears for more than 12 months--that is, 0.33 per cent.
Most people pay off their mortgages regularly, with few problems. Nevertheless, there have been concerns about the mortgage market for some time. As part of our manifesto commitment, the Government decided to consider whether there was a case for the regulation of mortgages. The Treasury published a discussion document in July, seeking comments on whether the advice on and selling of mortgage products should be regulated by the Financial Services Authority. A major part of the exercise was to seek evidence to show where consumers were being damaged in the present mortgage market. The Treasury received 200 responses from consumer bodies as well as lenders and regulators. The FSA published its own cost-benefit analysis. The Treasury has set out proposals for charges access terms-standard mortgages and received comments from a wide range of bodies on those proposals.
The Treasury is in the final stages of making a decision on how best to protect consumers; we hope to make an announcement soon. In response to the main mortgage
consultation, NACAB and others highlighted questionable practices by lenders, to do with arrears and repossession procedures while borrowers are still in possession, and chasing repossession debts afterwards.Regulation--if that is the eventual decision--could not cover the relationship between lenders and borrowers who are in financial difficulties. It would cover only the sales process, including the advice associated with it. Good advice would include consideration of whether the customer could afford the mortgage in the first place, and information about what might happen if he subsequently could not afford it.
Our proposed CAT standards are designed to ensure that lenders deal fairly with borrowers who have only modest arrears. We acknowledge that lenders need to have the means to recover outstanding moneys that are due to them--that is only fair to the majority of borrowers who pay on time. However, it is important that they do so in a reasonable manner without being unduly harsh.
In its report "The Long Shadow", NACAB calls for an amendment to the Limitation Act 1980 to clarify the limit of six years for lenders to start recovery action for mortgage shortfall debt, as my hon. Friend pointed out. The Limitation Act states that, in the case of the principal sum secured by the mortgage, no action may be brought to recover the sum after 12 years have expired. The length of time for other debts is six years.
In the 1997 Court of Appeal case of Hopkinson v. Tupper, the court considered that when a mortgagee has repossessed and subsequently sold the property under the terms of his security and is seeking to recover a shortfall, it is arguable that his claim is one in simple contract, whatever the nature of the instrument under which the debt was initially secured. In layman's terms, on sale of the property, any outstanding mortgage debt becomes ordinary debt. The time limits for those recoveries is six years.
Treasury legal advice is that the views expressed by the court do not serve as a legal precedent, which must be followed in later cases. However, I understand that the Law Commission has consulted on civil limitation periods in general. The Government will consider its report and recommendations carefully. Those matters are the responsibility of the Lord Chancellor's Department.
That does not mean that some rules are not in place. The Council of Mortgage Lenders, which represents some 98 per cent. of the mortgage market, has a statement of practice on handling arrears and repossessions. It sets out several principles and practices, which include: possession to be sought only as a last resort when all other attempts to make alternative arrangements have been unsuccessful; and lenders to be under a duty to obtain the best price that is reasonable for the property, but the sale of the property to take place as soon as possible to minimise the accrual of mortgage interest on the account. Following the sale of the property, the borrower remains liable to repay any shortfall between the amount of the outstanding mortgage
and the sale price obtained. The lender should notify the borrower as soon as practically possible of the amount of the shortfall.As a direct response to the NACAB report, the Council of Mortgage Lenders will shortly consult its members on the practical implications of lenders contacting borrowers during the six-year period. That is welcome news; I am sure that my hon. Friend will welcome it.
Like my hon. Friend, I was pleased that the Nationwide announced on 16 December that it will place a time limit--on starting the recovery of mortgage debt--of six years from the sale of the mortgaged property. In the light of the CML consultation, I am sure that other lenders will follow suit.
In drawing the debate to a close, I want briefly to take stock for a few moments to mark the historic changes to the role of women in the House. The first woman to be elected to the House was Countess Constance Markievicz, who represented Sinn Fein, in 1918. She did not take her seat, in common with other Sinn Fein Members. The first woman to take her seat was Viscountess Astor, who concluded her maiden speech by saying:
- "I am simply trying to speak for hundreds of women and children throughout the country who cannot speak for themselves."--[Official Report, 24 February 1920; Vol. 125, c. 1631.]
Miss Johnson: I am grateful to my hon. Friend for those remarks, which tie up with the CML's point that it is important that lenders secure the best price that is reasonably obtainable for a property. How a property is sold, and how quickly that is achieved, are indeed relevant. Indeed, under the code arrangements, lenders are under a duty to obtain the best possible price. The subject of the debate is important because it affects us all: our homes are central to our lives and our security.
There has been massive change in this century, both in terms of people's home lives and the representation of women in the House. The House has seen many other changes over that period, and I am grateful to my hon. Friend for initiating the debate on such an historic occasion. As we look forward to the new century and the new millennium, I am sure that he, like me, hopes that the House can be at least as instrumental in furthering the many issues that concern hon. Members and the wider public as it was in the past century.
- Adjourned accordingly at twenty-three minutes to Eight o'clock.
| Index | Home Page |