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There is still an issue about how to ensure greater availability of affordable housing in the long term. Yesterday, the Prime Minister, in his statement, gave an indication that more money will be brought forward, stitched together from various other departmental budgets, to increase the availability of social housing. That is welcome, as far as it goes. I understand that the Housing Minister is due to make a statement this week indicating that councils will have greater flexibility in their housing revenue accounts, to enable them to build more council houses of a traditional kind. Will the Minister confirm that that is correct? Will we have a statement about it and will the Government move on the issue?
Another development is taking place on which it would be useful to hear the Ministers thoughts. I understand that the biggest leap forward in the housing supply is now likely to happen in the form of institutional private investorspension funds and insurance fundsputting their money into private rented accommodation, some of which could then be managed by local authorities or other registered social landlords, with a share of property being available for social renting, much as we have had through owner-occupier developments in the past. Do the Government welcome that trend? Are they looking at the role that social landlords can play in collaborative arrangements with private developers producing private rented property? Have they thought through some of the legal implications? Is it part of Government long-term planning?
My concluding thought is that the Government have introduced some useful initiatives. They have undoubtedly alleviated the threat of repossession for probably thousands of people, but in many cases the problems are being postponed. We are building up a crisis that will probably reach maturity in a year or two. I want to use this debate primarily to persuade the Government to think ahead rather than looking back, and to consider how to deal with the problem when the crisis builds up in magnitude, as it surely will.
I congratulate my hon. Friend the Member for Twickenham (Dr. Cable) on a thoughtful and helpful contribution. He has been at the forefront of raising the issue over a number of years, and I am sure that the Ministers predecessor recognises that that has been extremely helpful in pressing the Government to make it an important priority. My hon. Friend said that his purpose was to review progress and to encourage the Government to think long term, which is important. I acknowledge that some of their actions have been helpful, but it is vital to look ahead and not merely to think about how to get through the next nine months before the general election. Whatever policies are put in place must help people in 2011 or 2012 when some of the problems will, unfortunately, still be working their way through the system.
I wholly agree with my hon. Friends analysis. The Council of Mortgage Lenders has downgraded its prediction of the number of repossessions, largely because
of low interest rates, but some of the Governments interventions have helped. However, we are storing up difficulties, particularly because, as he said, we have the long fuse of unemployment. I am certainly seeing that in my constituency where we were not particularly affected by the first round of redundancies in the City, but later redundancies in the retail sector have had an effect. During the next 12 or 18 months, that will work through into other sectors, such as architecture and building. The problems are working their way through the system.
There has been an impact in areas with high migrant populations. Many Polish workers have gone home, and that has had an impact on the rental market, which has then had an impact on those with buy-to-let mortgages. Some of those problems are also working their way through, and it could be another 12 months before we see the full extent of them.
The hon. Member for Kettering (Mr. Hollobone) spoke about his constituency and negative equity. Although many families are in negative equity, it affects certain areas in particular. For many people, it will have no impact because property prices may rise again and they may have no intention of moving, but if they come off a fixed-rate mortgage and interest rates rise, people who have been accustomed to switching their mortgage to get the best deal may not be able to do so. If they are still in negative equity and interest rates continue to rise, a further wave of people may get into arrears and difficulties leading to repossession.
My hon. Friend spoke about other aspects of borrowing, particularly on credit cards. Many people who face difficulties with arrears are juggling their finances by borrowing on credit cards. Credit card companies often shout loudest, and those who get into difficulties with their credit cards often face repossession sooner because they prioritise paying off their credit card instead of dealing with their mortgage, which is more important to their security because it affects their home.
The Government have introduced a plethora of schemes, many of which are welcome, but many are small and target particular groups. Even with the CMLs downgrading in the number of repossessions, we are still likely to see 65,000 repossessions this year, and if my hon. Friends more gloomy predictions are correct, in a year or so that number may rise again to 100,000. An enormous number of people will fall through the net of the Governments different schemes. The mortgage rescue scheme, which I will return to, was intended to help only 6,000 people, which is a drop in the ocean of the number of people who face repossession. It has failed to help almost everyone to whom help was promised.
I agree with my hon. Friend that ISMI has been the most successful scheme and certainly the most welcome, and its extension to an earlier stage is important for many people who face difficulties, but it does not help those with savings of £16,000 or those who have a partner who is working. If two people are paying the mortgage and one is made redundant, they are not eligible for ISMI. The Minister may say that other schemes can help, but the patchwork of schemes helps small groups of people and there are enormous holes in the net through which people are falling. Many banksperhaps 50 per cent. of lendersare not signed up to the mortgage support scheme.
The fact that the mortgage rescue scheme has helped only two families so far is laughable, and I hope that the Minister agrees that it is ridiculous to have a scheme that is so tightly drawn that we ration through bureaucracy rather than the amount of money that is available to help people. We must make the scheme considerably more flexible. Because of the cap on the overall level of borrowing, councils such as Islington have made use of the Governments scheme, but have supplemented it with their own finance to ensure that people in areas with high property prices are eligible. I hope that the Minister will say more about that, because in the long term it may not be sustainable, particularly for councils in London.
My hon. Friend spoke about the tight definition of homelessness, which the hon. Member for North-West Leicestershire (David Taylor) also mentioned. The scheme is targeted at those who would meet the council criteria of homelessness, which all MPs know leaves an enormous number of people in difficulties. A lone man, for example, would be outside the category, and most people would be classed as being intentionally homeless. The Government must try to make the scheme more flexible so that people do not have their hopes raised only to find, three or four months into the application process, that they are not eligible. My hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy) told me that a constituent had spent months on the application process, having been told at the beginning that she would be eligible, and stored up arrears during the process, only to find at the last minute that she was not eligible for the scheme. The problem was worse than it would have been had she not applied in the first place.
The pre-action protocol contains most of the interventions and criteria for which we have been arguing, but it lacks teeth. My hon. Friend the Member for Twickenham and the hon. Member for Castle Point (Bob Spink) said that although it is welcome and helpful, the courts do not have the legal power to intervene and to enforce the protocol. If a lender defaults on anything in the protocol, the courts can do nothing. I have been pressing the Government for some time to accept that mortgage law reform would be more sensible, and much of the detail could be put into guidance. Shelter has been arguing that we should also reform mortgage law to deal with tenants in buy-to-let properties. If we merely gave courts the power to intervene, many of the other issues could be put into guidance; it is not necessary to put everything into primary legislation.
Mortgage law is incredibly outdatedit is mired in its 18th and 19th-century common law originsand the Financial Services Authority is not doing enough to regulate poor practice. As my hon. Friend mentioned, many mortgages are not covered by the FSA. Second charge mortgages and any mortgage entered into before October 2004 are not regulated through the FSA. That applies to buy-to-let mortgages as well.
We also still have foreclosure on the books. That remedy has no place in modern mortgage law and I hope that the Minister agrees. It may be little used, but the mere fact that it is still available, especially at a time when we face many more repossessions, is a reason in itself for the Government to amend mortgage law. By dealing with that issue, they could do a great deal to help the people who will fall through the net in the next 12 months.
I mentioned that changes in employment practice, particularly in areas with many rented properties, affect people who have bought to let. As I said, I have seen that in my constituency. Many Polish workers have gone home in the past two or three months, so many rented properties have been left empty for months at a time and many landlords are getting into arrears. Many of those people have bought the property on a buy-to-let basis. They are not necessarily big developers; they may have bought only one property, perhaps as an investment for their pension fund. They are most likely to have done so through a sub-prime mortgage. It is one thing if the property is empty, but if the property is then let and the landlord is still in difficulty, the first that the tenant knows about that, unfortunately, may be when they come home to find the locks changed.
The Ministers predecessor said that he was keen to act on that issue, but the Government have not acted on it yet. Many tenants are finding themselves in that difficulty and it is an urgent problem. I hope that the Government will not delay further in acting for tenants of buy-to-let properties. As I said, the most sensible way to deal with the problem would be to give the courts the power to intervene. They could then enforce a notice period at the point of repossession so that families had an opportunity to look for other property. It is also important that we ensure that lenders send unaddressed notices to the property as many times as possible to raise awareness of the situation among tenants. Of course, many lenders may not be aware that the property is being let. Unfortunately, people often let a property without the lenders permission and then they get into difficulty later, so what I have described has to be done at the stage of repossession. I hope that the Government will consider reforming mortgage law so that that happens.
Bob Spink: The hon. Lady makes a lot of sense and I congratulate her, the hon. Member for Twickenham (Dr. Cable) and the Liberal Democrat party on introducing the idea of the pre-repossession protocol and pushing it heavily until the Government took it on. Does she think that the Government could do more to issue guidance to ensure that council housing departments treat people who face repossession, or who know that they will face repossession, with more dignity and more humanity, because often they are put through the mill by council housing departments that do not allow them to have that dignity?
Sarah Teather: Unfortunately, an enormous number of people who face homelessness, regardless of the cause, are put through the mill by council housing departments. I do not think that that is unique to people facing repossession. I am not sure that they are treated any worse than someone facing eviction by their landlord. I see many cases in which people are basically expected to turn up at the councils doors with their children in one arm and their suitcases in the other, and that is the first time that they will get any help from the council. They may be working to try to prevent homelessness during that period, but they have no assurance that they will be rehoused until they turn up at the housing departments door with all their belongings in tow.
Unfortunately, as my hon. Friend said, that has as much to do with housing supply, and particularly the supply of affordable housing to rent, as it does councils supposedly being heartless. If, as in my constituency, 20,000 families are on the housing waiting list and there is only the possibility of 1,000 families a year moving, the rationing criteria will inevitably seem extremely heartless to the other 19,000 families who face the misery of not being able to get the home that they need.
With regard to what happens after properties are repossessed, we need to increase the supply of affordable housing to rent. We were expecting an announcement from the Minister for Housing todayI presume that it will be made at the Local Government Association conference, unfortunately, rather than in the Houseand we hope to hear about the review of the housing revenue account. However, I was disappointed that in the list of Bills that the Government said that they might introduce in the Queens Speech later this year, no housing Bill was mentioned. The much-lauded reform of the HRA, whereby councils would be able to keep their rental and sales receipts, clearly means sweet Fanny Adams when we look at what the Government are actually going to do.
I read the Prime Ministers statement yesterday and saw that the word consult appeared before reform, which filled my heart with lead, as the Government have been consulting on the HRA for a very long time. Surely now is the time to implement the changes that everyone has been calling on them to implement. I do not think that they can do that without putting it in primary legislation. Perhaps the Minister will challenge my belief and tell me that they can, and that they will do it before the end of the summer, or at least introduce that policy in the autumn, but I fear that I and all my constituents and everyone else on the waiting listthe 1.8 million familieswill be sorely disappointed.
Justine Greening (Putney) (Con): I congratulate the hon. Member for Twickenham (Dr. Cable) on securing this debate on an incredibly important topic. As I am sure he is aware, the Opposition have recently held two debates on housing to raise similar issues on the Floor of the House, because we too feel that we need to put a stake in the ground to ensure that the Ministers who are taking decisions think about the problems that constituents up and down the country face daily.
Whenever the country is in a recession, people have two fundamental worries. They are worried about losing their job and they are worried about losing their home. That is ultimately what things boil down to. I will talk about some of the underlying issues relating to how we can support the economy and support housing, but the main subject of the debate is the Government schemes that have been introduced and whether they are working effectively.
Clearly, there is a massive problem of repossessions. Although, as we have heard, the Council of Mortgage Lenders has just revised its forecast for the number of homes that it expects to be repossessed in 2009 from 75,000 to 65,000, that is still 65,000 families throughout the country whom the CML feels will lose their homes by the end of the year. It is still a massive number.
In addition, Shelter has said that it is seeing a huge rise in the number of families and people coming to talk to Shelter about mortgage arrears. There has been a 250 per cent. increase in the number of queries to its free helpline in the past year and an 85 per cent. rise in the number of calls it receives about repossession specifically. When I met representatives of Shelter last week, they raised concerns, much as the hon. Member for Twickenham did, about the fact that we should be very careful not to regard announcements such as the one by the Council of Mortgage Lenders projecting a lower level of repossessions than previously forecast as a kind of respite or message that the storm is passing.
One has only to read todays papers to see that many commentators are raising the prospect of a W recession, which makes sense in terms of repossessions in many respects. Many of the repossessions that we have seen do not involve people who have lost their jobs and fallen behind on their paymentswe may not have reached that stage yet. The repossessions that we have seen often involve people who have taken out highly geared mortgagesperhaps more than 100 per cent.as part of fixed-rate, short-term deals. When the credit crunch happened, those deals came to an end, and people were unable to find similarly good deals to keep their mortgage payments at the same level. They saw massive rises in their mortgage payments at a time when they could least afford it.
Indeed, the retail prices index of inflation was also high last year, and a lot of our debates in this place were about the rapidly rising cost of living. On top of that, the subsection of people I am talking about saw their mortgage payments rise and they struggled, but ultimately failed, to find deals that were as good as those that they had found a few years earlier, when lenders were still happy to build their mortgage books through aggressive lending. As we have seen, such business models led many lenders into huge trouble and ultimately to come to the British taxpayer to be bailed out.
We should be careful to see the problems of those different groups of people as having fundamentally separate causes. One group got good, highly geared mortgage deals, but could not find the same deal a couple of years later when their short-term rate came to an end. More worryingly perhaps, the other cohortmany commentators, including Shelter, have flagged this upinvolves the more traditional repossessions that we see in a recession.
As we have heard, repossessions are often a lag indicator, alongside unemployment. Unemployment has risen dramatically, and all sorts of forecasters, including the OECD, expect it to continue to rise dramatically. We have only to walk down our local high streets and parades of shops to see that small businesses are increasingly under pressure. We hear an awful lot on the news about big companies shutting down with large job losses, but, underneath all that, a plethora of other jobs are being lost every day of the week because small firms are going out of business.
There is a worrying rise in repossessions, and we should be cautious not to assume that the recent downgrading of the forecast for this year will be the end of the story. If interest rates rise again, a range of fresh pressuresnot least job losses and interest rate risesmay, unfortunately, put more pressures on families who are finding it hard to keep up their mortgage repayments.
Of course, my party welcomes any measures that can be introduced to help families navigate their way through what is the most stressful experience for any familythe prospect of losing their home. We have already heard comments about the schemes that the Government have introduced, but it is only right that I should add my comments as the Opposition spokesman.
Obviously, the mortgage rescue scheme has been disappointing. It was announced with much fanfare in September 2008. It is a substantial £285 million scheme, which aims to help 6,000 families. As the hon. Member for Brent, East (Sarah Teather) said, help for 6,000 families is obviously welcome, but we are talking about a comparatively small proportion of those affectedprobably less than 10 per cent. of even the reduced figure for repossessions that the CML is forecasting for this year. Furthermore, 6,000 is the number who are to be helped over two years, although the latest figures that we haveI hope the Minister can update usshow that just two families have been helped after four months, which is disappointing.
It is clear from the debate that if we are serious about introducing schemes to help people stay in their homes, we have to understand how those schemes work and whether they work effectively. The mortgage rescue scheme seems to involve a huge amount of bureaucracy, which is the message that comes through whether one talks to local authorities or, as I have, to constituents who are looking at whether they are eligible. The message is that the process is lengthy and complicated.
When we raised these issues in a debate a couple of weeks ago, it was surprising to hear that the Government do not seem to keep that many statistics. Who will be able to take advantage of the mortgage rescue scheme? Who is in the pipeline? Where in the country are they? How many people are close to being able to access the scheme? Unless we are willing to track its performance more meaningfully, it is difficult to find out whether it is working effectively, and we end up finding out that it is not working only four months down the track, when we see that just two families have been helped. We all want these schemes to work, so I hope that the Minister can talk a little more about how the Government will monitor the mortgage rescue schemes effectiveness and whether they plan to review it. That would be very much appreciated.
The mortgage support scheme was announced in December 2008, but it was not launched until April 2009four or five months later. We have flagged up our concerns about whether lenders that should have signed up to the scheme have actually done so. We need more transparency on that from Ministers. As the hon. Member for Twickenham said, key lenders, including some building societies, are not signed up. That is deeply worrying. We would like to hear from the Minister which lenders are still not signed up and what efforts the Government are making to encourage them to do so.
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