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Interest Rates

Volume 178: debated on Friday 12 October 1990

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To ask the Chancellor of the Exchequer when he next expects to meet representatives from the Building Societies Association to discuss the current level of interest rates.

My hon. Friend the Economic Secretary met the Building Societies Association yesterday to discuss a number of issues.

Will the Minister confirm that he will have to reduce the mortgage interest rate by another 1 per cent. if the large number of people whose mortgages are assessed annually are to have any serious relief? Will he also confirm that unless there is expenditure on research, development and the infrastructure, any benefits that might be created by a reduction in interest rates will he lost? Does the Minister acknowledge that it is the result of his Government's ineptitude that home owners have to bear these massive mortgage increases?

On the first point, it is for the lenders to decide when and how to reduce mortgage interest rates for borrowers. As for any further reductions in interest rates—[Interruption.]

I am not used to this degree of acclamation, but I think that I could get used to it. As for future cuts in interest rates, as my right hon. Friend the Chancellor of the Exchequer said, there will be no further cuts until it is safe to do so.

Does my hon. Friend agree that it is noticeable that most of today's questions, such as this one, from the Opposition relate either to inflation or to interest rates but never to both? Will my hon. Friend confirm that whether one is inside or outside the exchange rate mechanism there is no soft option for curbing inflation and that it is dishonest of the Opposition to try to pretend that there is?

My hon. Friend is entirely right. If we want to cure inflation, there is no alternative to keeping interest rates as high as are needed, getting demand down and keeping a downward pressure on demand. In that way we will secure the reduction in inflation that is essential if we are to return to the periods of sustained growth that we saw during the 1980s. We are confident that the Government's tough policy of maintaining interest rates uncomfortably high is working and will show its reward next year in a substantial fall in inflation.