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30 Jun 2009 : Column 14WH—continued
Hon. Members have commented on the pre-action protocol, but I want to make some slightly different observations about how it is working. The protocol could help, but the way in which different lenders deal with their customers is hugely variable. This has not been discussed today, but I would like to hear from the Minister about the extent to which the Government are looking at the role of the FSA and the “treating customers fairly” regime, which, as he will be aware, has just been subsumed into the FSA’s general ARROW—advanced,
risk-responsive operating framework—assessment of lenders. I would also like to know whether arrears are being effectively dealt with.
I have asked parliamentary questions to find out whether the “treating customers fairly” regime was up and running and to find out about the ARROW assessments, which that regime is now part of. Is it the FSA’s judgment that banks are behaving fairly? The picture is very opaque. Does the Minister feel that there should be more transparency about what the FSA is looking at and about its views? I understand that two lenders are on the ARROW watch list following assessments by the FSA, but it is impossible to find out which two. The more data there are in the public domain, the better able customers will be to decide whether they want to transact with certain companies in the future. Most people who get a mortgage will want to know that the lender will be there for them not just in the good times, when they want a good deal, but in the bad times, when they need help.
We have also talked about the ISMI scheme. Again, the fact that it is now available earlier is welcome, but there are concerns about eligibility and accessibility.
To conclude, the real solution to the problem of repossessions is to get the economy back up and running. In particular, I urge Ministers to support small businesses around Britain, because they are most vulnerable to the recession we find ourselves in. We have been urging the Government to consider the steps they can take to help small businesses, such as reducing national insurance for the smallest businesses, enabling them to defer paying VAT, and simplifying their capital allowances structure so that we can reduce the small companies rate of corporation tax.
Will the Minister take a careful look at how business rate rises affect small companies? If we can keep them going, or help them to keep themselves going, that is the best way to stop repossessions, because it will keep people in jobs. It is when people lose their jobs that they become most susceptible to losing their homes.
Given the debate that is taking place in the House today, I urge the Minister to tell us more about the housing announcements that we have been hearing about. As the hon. Member for Twickenham said, affordability underpins the entire issue. The reason why many people have had such huge and highly geared mortgages that now, in an economic recession, they find it hard to continue paying is the fact that lack of housing stock pushed up prices. There are fewer housing starts in Britain now than at any time since the 1920s.
Every year since this Government have been in office less social housing has been built than in the preceding 18 years. That is disappointing. A range of Government measures is needed, and the Opposition have made proposals to ensure that starting rates of social housing will go back up. That will make sure that there is more affordable housing. Supporting housing and jobs is the best way, in the longer term, to minimise the underlying risk of repossessions, whatever the economic weather.
10.32 am
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr. Ian Austin):
It is a pleasure to serve under your chairmanship this
morning, Mr. Amess. I congratulate the hon. Member for Twickenham (Dr. Cable) on securing this important debate and thank all the hon. Members who have taken part; I shall try to respond to the points that they made. It was a pleasure to listen to the hon. Gentleman’s speech and it is a privilege to be replying to someone who has won the respect of Members in all parts of the House and, much more importantly, of members of the public. In this debate he has displayed the sure-footedness and nimble feet that we would expect from Westminster’s best known ballroom dancer, and the depth of knowledge and thoughtfulness of someone who has been contributing to the economic debate in this country for probably more than 30 years, as a special adviser to previous Governments, in local government, as a senior economist in the private sector and now, of course, as one of the leading figures on his party’s Front Bench.
As you can imagine, Mr. Amess, in preparing for the debate, I wanted to see whether among the dozens of publications in the hon. Gentleman’s name there was anything written by him on housing. I can report that he has gone from contributing to the “Red Paper on Scotland” in the 1970s to the Green Book more recently, and seems to have covered every other subject on earth in between, from “Regulating Modern Capitalism” to “Globalization: Rules and Standards for the World Economy”. He wrote “The Role of Handicrafts Exports: Problems and Prospects Based on Indian Experience” and even “Evaluation of the Multifibre Arrangement and negotiating options”, which sounds like a riveting read, and which I look forward to reading if he will lend me a copy. Unfortunately, I have to report that I could not find anything on housing, but I think that we would all agree that he has more than made up for that this morning in the second debate on the issue that he has secured this year. I am grateful to him for that because it gives me the chance to report on the progress that has been made.
In these difficult times, as Members of all parties have pointed out, families need extra support and help. They need a Government who are on their side, providing help for them to stay in their homes and to avoid repossession at every stage, from free debt advice at the moment when problems start, to free legal advice at courts throughout England on the day of the repossession hearing. The Government have an excellent track record on preventing homelessness and have acted decisively to help households struggling with their mortgages to ensure that, wherever possible, they are able to remain in their homes. We can all imagine the horror of losing one’s home and the devastating impact that that must have, so I reassure the House, and families throughout the country, that we are determined to help as much as possible. I promise that we will do everything in our power to ensure that no household demonstrating to the bank a willingness to pay must face the fear of repossession of the family home.
Households must clearly talk to their lenders as soon as possible if they are facing financial difficulties. Since the autumn, we have put in place a framework of protections and universal help, as well as targeted schemes for households in different circumstances. We have enhanced help through the benefit system, and we have put in place the mortgage rescue scheme, which hon. Members have discussed, and the innovative homeowners mortgage support guarantee scheme. The legal protections for
home owners have been strengthened so that lenders can repossess their home only as a last resort, and options to help them stay in their home must be explored first. Lenders are required to treat borrowers fairly, so people should not be afraid to talk to them as soon as they think they are going to have difficulties making payments. There is free, independent advice on the help available to keep them in their home. That is markedly different from the delayed reaction in the 1990s, when lenders were relied on to respond, without financial support and leadership from Government.
I want to emphasise the importance of looking at the package of help that we are providing as a whole, to appreciate the positive impact that it is already having. Every repossession is a tragedy for the family, and all the figures and statistics will be no consolation to those who are affected, but it is still worth pointing out that the current figures provided by the Council of Mortgage Lenders show that the number of repossessions in 2008 represents about 0.34 per cent. of all loans. That means that, despite the fact that more than 1 million more households now own their own home, the numbers affected are proportionately smaller than in the 1990s. The CML has already said that its forecast of 75,000 repossessions this year looks pessimistic in light of Government intervention.
In answer to the question from the hon. Member for Twickenham, the Government are working with Shelter, the National Debtline and the CML to research what happens to households post-repossession. That is part of a package of work agreed through the Home Finance Forum. The CML has also reduced its figure for repossessions, and that revision is a direct result of the action we have taken, in combination with low interest rates and other actions to support the economy.
I want to talk a little more about the universal and targeted help that we are providing, and the impact that that is having in helping people to keep their homes. The first step to avoiding repossession will be forbearance by the lender and the opportunity for a household struggling with a mortgage to agree more manageable monthly payments. Most people who are facing difficulties will be able to agree a solution with their lender. We have put in place Financial Services Authority regulation of lenders, which, since 2004, requires lenders to treat customers fairly, and to treat repossession as a last resort.
FSA regulation is supported by the new mortgage pre-action protocol, introduced in November 2008. That sets out clear guidance to the judiciary on what steps the courts expect lenders to take before bringing a claim in the courts. That ensures that lenders have discussed other alternatives with the borrower. There are early signs that the protocol is having a positive impact. More borrowers are approaching lenders earlier to discuss options, and Ministry of Justice figures show a 42 per cent. drop in mortgage repossession claims issued in the first quarter of 2009, compared with the first quarter of 2008. We have also provided extra funding for debt advice, including a £6 million additional investment in National Debtline telephone advice, to March 2011, which will help up to 70,000 people per year who are suffering from debt problems, and £10 million to Citizens Advice, to March 2010, to expand face-to-face debt advice capacity and so help an additional 500,000 people.
Even at the latest stage, when a possession case has reached court, repossession is not inevitable, and getting advice and support can help households to remain in their home. We now have universal access to advice desks in courts in England, providing free, on-the-day legal advice and representation to people facing repossession or eviction hearings.
Justine Greening: May I take the Minister back to his earlier comments? He will be aware that the “treating customers fairly” initiative, which was supposed to become mandatory in December, has been embedded in the ARROW core supervisory assessment. That is all well and good, but the by-product is that we did not discover in December whether lenders had complied with the initiative. Will he give us an update? Did lenders comply with that regime before it was subsumed into the core supervisory work?
Mr. Austin: I shall provide more details later in my speech.
People now have universal access to advice desks in courts throughout England, which provide free legal advice and representation to those facing repossession. Last year, more than 34,000 households accessed that free advice.
Depending on their circumstances, households may benefit from a range of schemes to reduce their monthly mortgage payments to a level that they can afford. We have put support in place through the benefits system that includes support for mortgage interest, or SMI, payments being made to customers’ mortgage interest payments.
In January, we extended the scheme to provide even greater support for home owners. We doubled the capital limit for loans to £200,000; we reduced the waiting period so that households now receive help 13 weeks after claiming benefits; and we froze the standard interest rate used to calculate the amount of SMI awardable to customers at 6.08 per cent until December 2009. Some 220,000 households benefited from SMI last year, and we expect up to 10,000 extra households to benefit from further changes over the next two years.
We have put in place a mortgage rescue scheme, under which the local authority can step in, over two years, to support some of the most vulnerable households facing repossession, allowing them to remain in their homes. A housing association will buy an equity stake in the property to reduce mortgage repayments to a manageable level, or buy the property in full and rent it back to the household at a lower than market rent. The scheme has been available from all participating local authorities since 1 January 2009, following the successful fast-tracked delivery of the scheme in nearly 80 authorities last year.
I reassure the hon. Member for Twickenham that he can do away with his conspiracy theories. However, he might want a quicker researcher. The figures were published at 9.30 am today. They show that more than 5,000 households struggling with their mortgage received free advice from their local authority in the five months from January. By the end of May, more than 200 households had benefited under the mortgage rescue
scheme, which stops the immediate threat of repossession and freezes charges, and a further 295 households are at the assessment stage.
We are now focusing intensively on ramping up take-up and accelerating processing times. We are determined to ensure that help through the mortgage rescue scheme is available to all who need it. We are listening closely to feedback from our delivery partners, money advice agencies, local authorities and registered social landlords, and we are responding flexibly. We have already amended the scheme to include second charge loans and households in negative equity. We will continue to keep the scheme under review.
Dr. Cable: The Minister said a few moments ago that 200 families are now being helped under the mortgage rescue scheme. Does that mean that we have gone from two to 200 in a month—that 200 have been rescued—or that 200 are under discussion, which is very different? How many families have completed agreements under which they are being rehoused?
Mr. Austin: The important thing about the scheme is to recognise that families receive help at various stages, and are prevented from ending up at the final point. To judge the scheme only on the numbers that come out at the other end is to undersell its importance. As I said, 200 households have benefited from action under the mortgage rescue scheme, which stops the immediate threat of repossession and freezes charges. A further 295 households are at the assessment stage.
Sarah Teather: I understand what the Minister says, but I hope that he remembers the example that I gave of a colleague’s constituent. The family had been all the way through the system, during which time it had built up further arrears, but only then was told that it was not eligible. The process of applying, which took two or three months, had made things worse, yet at the end of it the family was told that it was not eligible.
Mr. Austin: As I said earlier, we are talking to all the participants in the scheme to see whether we can accelerate it.
I can now respond to the hon. Member for Twickenham. The number of families that have received help at the final stage has increased from two to six. There were four completions in May, which shows that the impact of the scheme is accelerating.
Justine Greening: I am grateful to the Minister for giving us those figures at long last. Does he have a figure to show the split for local authorities? I presume that the data are being collated by local authorities. I know that many Members would be interested to know how many of their constituents were at the various stages of the process. Would the Minister place that information in the Library?
Mr. Austin: I do not have those details with me, but I shall check. If we can make them available, we will do so.
Financial help is available from local authorities, with the £20 million for the preventing repossession fund that was announced at the last Budget. It will enable local authorities to offer households small loans to prevent repossession or eviction. The fund is available to anyone threatened with homelessness through
repossession or eviction. For example, it could be used to clear mortgage or second charge arrears in appropriate cases if it prevented repossession. Financial assistance through small loans will allow money to be recycled, which can help other households in the local authority area.
Homelessness prevention funds have played an integral part since 2003 in the fall of over 60 per cent. in the number of households being accepted as homeless. We also launched the homeowners mortgage support in April, to help homeowners remain in their homes if they fall on difficult times. The scheme enables eligible borrowers to reduce their monthly interest payments to affordable levels for up to two years to help them get back on track with their finances if they suffer a temporary income shock. All lenders offering HMS will have the financial backing of a Government-backed guarantee that will protect the lender if the customer ultimately defaults on the mortgage.
The hon. Member for Twickenham asked for details of the lenders involved in that scheme. Lenders covering about 80 per cent. of the mortgage market are now providing enhanced support for those of their customers who may be facing difficulties. Lenders offering HMS from 21 April include the major high-street lenders Lloyds banking group, which includes HBOS and Northern Rock; the Royal Bank of Scotland, which includes NatWest, the Ulster bank and Bradford and Bingley; Cumberland building society; and the National Australia bank group, which includes Clydesdale and Yorkshire banks and Standard Life.
A number of other major banks, building societies and specialist lenders have confirmed that they will offer their customers HMS as soon as possible. They include the Bank of Ireland, which includes Bristol and West and the Post Office; GMAC Financial Services; GE Money, which was referred to by the hon. Gentleman; and Kensington Mortgage company. All lenders offering HMS will have the backing of a Government guarantee to protect the lender if the customer ultimately defaults. Four other high-street lenders—Barclays, HSBC, Nationwide and Santander—are now offering comparable arrangements to their customers. I hope that I have answered the hon. Gentleman’s question.
The scheme is still in its early days, but more that 17,000 households have accessed information on HMS since its launch. We want to see lenders offering the scheme to help as many households as possible, in order to avoid repossession, and we are working with lenders to ensure that all households for whom HMS is the most appropriate option are able to gain access to it.
These difficult times are affecting not only home owners but tenants, as was pointed out by the hon. Members for Twickenham and for Brent, East. The present difficulties also affect tenants renting from borrowers who default on the mortgage. That affects only a small number of households, but that does not make it any less just. We have therefore taken measures to address the problem. Civil procedure rules were changed so that, from April, buy-to-let tenants get up to seven weeks’ notice, which is up from the present two weeks, if their landlord’s mortgage defaults.
We need to do more, however, to ensure that all tenants are better protected, regardless of whether their tenancy has been authorised by the landlord’s lender, as is usually the case in a buy-to-let mortgage agreement.
Last May, we announced our intention to legislate at the earliest opportunity to fill a gap in legal protection for private tenants whose landlords suffer repossession by ensuring that they receive adequate notice to vacate the property, regardless of whether their tenancy has been authorised by the landlord’s lender. We shall consult on our proposals over the summer with a view to legislating at the next opportunity. In the meantime, we are working closely with lenders to improve their current practices when they find an unauthorised tenant in a property of which they are seeking possession. Any tenant who is concerned, or who has received notification of a court possession hearing, should seek advice immediately. They should contact the mortgage lender taking repossession action and attend the hearing so that the judge is aware that there is a tenant in the property.
The hon. Member for Brent, East asked about HRA reform. Later today, when my right hon. Friend the Minister for Housing announces the outcome of the review of council housing finance, he will also outline proposals to allow councils to keep all the proceeds from their own council house sales, as well as their rent.
Sarah Teather: I want to clarify that point. That is when the outcome of the review will be announced, but when will it actually be implemented? As I said, I could not see any housing Bill in the advance legislative programme.
Mr. Austin: As I said, my right hon. Friend will provide further details later.
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