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Building Societies Association

Volume 893: debated on Wednesday 11 June 1975

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asked the Secretary of State for the Environment what recent discussions he has had with the Building Societies Association.

My Department keeps in close touch with the Building Societies Association on a wide variety of topics. In the most recent discussions which we have had, the building societies have indicated their willingness to help make good the £100 million switch from local authority mortgage leanding for home ownership.

Is the Secretary of State not just a little apprehensive that with the arrival of the Government's new index-linked savings scheme directed at those who traditionally invested in building societies, there might be a considerable effect on the funds of building societies, with a consequent effect on the availability of mortgages? In any of the discussions he has had with the Building Societies Association, has it ever been suggested that the Government, as they did with the Save-As-You-Earn scheme some time ago, should be prepared to underwrite a similar sort of index-linked system, but tied to building society investment?

I am a little apprehensive about what the Treasury does under any Government. I have discussed this matter with the building societies, and although no one would be so foolish as to dogmatise about it for the future, both we and they for the moment believe that neither that scheme nor the reduction to 7 per cent. in the borrowing rate will unduly jeopardise the inflow of funds. However, this is something to be watched from month to month.

On the wider question, I am sure that as part of the long-term review of housing finance we shall have to consider ques- tions like indexation, and others of the sort the hon. Member mentioned.

Is it not unacceptable that at present building societies have an abundance of money that they are able to lend at gross rates of 11 per cet. while local authorities are having to pay nearly half as much again for the money they borrow to finance public authority building? What step does my right hon. Friend intend to take to deal with that situation?

I have said many times in the House that the crux of the difficulty concerns local authorities whose mortgage rate is above 11 per cent. About 50 authorities are entitled to lend above the building society rate of 11 per cent. This problem has troubled me a great deal in recent months, but without finding an additional subsidy, which I am not prepared to do for this purpose, there is no way in which I can help the authorities concerned.

Does the Secretary of State agree that local author-ties can play an increasing part in the granting of mortgages? Would it not be better for them to spend the money they are likely to have to lay out in buying up development land on providing mortgages for first-time buyers instead?

I want to see both local authorities and building societies as actively concerned as they can be in the granting of mortgages to first-time purchasers.

Is it not possible for a scheme to be devised under which building societies can, if necessary, take over some of the existing local authority mortgages thereby avoiding the increasing numbers of authorities who week by week, are having to charge rates of 12 per cent., 13 per cent., 14 per cent., and 15 per cent.? If this situation continues it will lead to disaster.

I take that point. We have spent a lot of time examining that possibility. At the moment the main priority in discussions between ourselves and the building societies must relate to the much wider and larger question of the £100 million switch in local authority lending. There will be regional discussions on this matter between the local authorities and the building societies, but whether out of these discussions can come a solution on the lines my hon. Friend is suggesting we shall have to wait and see.