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Repossession and Mortgage Arrears

Volume 495: debated on Tuesday 30 June 2009

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr. Blizzard.)

I am glad to have an opportunity to return to a subject on which I have introduced several debates in the last few years, including one six months ago and an Opposition day debate a year ago. The subject is immensely important because, of all the victims of recession and economic crisis, the people who have the greatest difficulty are those who lose not only their job, but their home, with all the consequences that has for family distress, local homelessness and the availability of emergency and social housing.

Two things have happened in the last six months that merit a return to the subject. First, the Government have introduced a wide range of measures, many of which we on these Benches, and indeed other hon. Members, called for. Citizens Advice, Shelter and other organisations acknowledged that such measures have had a positive impact. A lot has been done in the form of the pre-action protocol, the income support for mortgage interest scheme, the mortgage protection scheme and the home owners mortgage support scheme. I propose to review the progress of those schemes.

From the outset, I acknowledge that many initiatives have been introduced. However, some have been more successful that others. The mortgage protection scheme has not been particularly successful. I understand that the latest monthly figures on that so far rather embarrassing scheme were due to appear this morning; in fact, I think they were to be published at midnight. If I were a conspiracy theorist, which I am not, I would wonder why they did not appear before this debate. We shall no doubt hear how that scheme is progressing. There is a lot to report, and I hope that the Minister will be able to update us.

The other reason for reviewing the matter after a period of months is to take a rain check on what is happening with underlying trends as the schemes affect repossession and its consequences. In the short run, there is some good news in that the Council of Mortgage Lenders has revised downwards its estimate of the number of people whose homes are likely to be repossessed this year from, I think, 75,000 to 65,000. It acknowledges that that is at least partly because of the intervention of Government schemes. There is also a worry that although such schemes are stabilising the position in the very short term, we are storing up even bigger problems for next year and the year after.

In periods of recession, many things happen on a time lag; for example, unemployment lags behind the economy in general. Unemployment continues to rise, and the problems of repossession and arrears lag behind unemployment, so we are dealing with something that has a very long fuse. Many people who deal with housing needs are worried that the problem will worsen badly next year and the year after. There are several reasons for believing that, one of which is that, even if the economy were to recover in a conventional sense, we would expect interest rates to rise. The fact that we have historically low interest rates—at least at base rate level—is one of things that is alleviating the problem at the moment. That is not something on which we can continue to count.

In addition, what seems to be happening through the pre-action protocol and other interventions is that many of the problems are being dammed up. Good practice and forbearance by the courts and mortgage lenders are rightly keeping some of the problems at bay, but eventually they will have to be dealt with. There will be a flood of repossessions when the delays are worked through. The Government’s schemes are temporary, and there is a concern about what will happen when that period ends.

Some interesting and slightly worrying analysis has been conducted by a Mr. Shepherdson, who is the former chief economist at HSBC. He believes that, taking all those factors into account, repossessions may well be running at more than 100,000 a year by 2011. There is a worrying level of delayed reaction. It is useful to have this debate at this stage because we can flag up that problem in advance and be clear about whether the Government have thought through their emergency actions and what has to happen next.

The hon. Gentleman has raised a crucial matter and he is absolutely right: it is timely that we consider it now because of the importance of a stitch in time. It is right to try to prevent avoidable repossessions—in the interest not just of individuals and their families, but of society as a whole. The Government have introduced some schemes, but pre-repossession protocol is only a discretionary requirement on judges. Does he agree with me and the content of early-day motion 34 in saying that we should encourage the Government to put that protocol on a statutory footing, so that we know it exists and judges will have to obey it? That will mean that we can avoid repossessions where possible.

I agree with the hon. Gentleman. I hope that I have signed his early-day motion. If I have not, I will do so. He makes a good point, to which I will come shortly. It is true that the majority of judges seem to be taking the matter seriously, but not all are. There are many gaps in the protocol, and I will elaborate on that in a few moments.

The other trend to which it is worth referring is the growth in negative equity. In a perverse way, that is helping to alleviate the problem of repossessions because, as long as banks and other lenders can see that there is negative equity, they are less likely to repossess property on which they will make a loss. In the short term at least, market forces alleviate the problem, but negative equity is a major issue that is growing.

Some interesting figures produced at the beginning of last week by the credit agency Fitch estimate that currently about 10 per cent. of home buyers are in negative equity, and in some parts of the country—the midlands and city centres such as Birmingham, Manchester and elsewhere—the figure is probably up to 30 per cent. That is according to a narrow measure, which does not take any account of sub-prime lending. A wider measure that takes account of negative equity in relation to actual loans suggests that 15 per cent. of loans are in negative equity. That is at a time when the housing market has not yet adjusted to the level that many analysts and, I think, the Government themselves consider likely: a 30 per cent. fall from the peak. On average, we are currently talking only about a 20 per cent. fall. The market suggests that it is likely that negative equity could well increase in severity. When that happens, further problems will build up.

The figures that I have mentioned exclude the extreme problems of the sub-prime mortgage market, which we have in this country as well as in the United States. Analysis by organisations such as Shelter and Citizens Advice suggests that there are probably about 750,000 sub-prime mortgages out there. Some 20 per cent. of the borrowers of those mortgages are seriously struggling. I was horrified to see that 40 per cent. of all sub-prime borrowers resort to other forms of borrowing, such as credit cards, to maintain their mortgage payments. A big, subterranean arrears problem is building up which is not captured in the figures of the more reputable mainstream lenders.

I congratulate the hon. Gentleman on securing this important debate. Sub-prime lenders have been particularly active in recent years in encouraging people to exercise their right to buy in relation to local authority or housing association property. Many hundreds of people face repossession, and the irony, or even tragedy, is that the local authority whose house they once rented has no statutory obligation to rehouse them when they are repossessed because they are considered to be intentionally homeless, not having exercised due caution in applying for loans that they could not afford.

I agree with every word that the hon. Gentleman has said so far. Does he believe that the Government or local authorities could do more in such cases, which could add up to a couple of thousand of the 100,000 cases of people losing their home that he predicts in the next year or so?

The hon. Gentleman is right, and I will go on to deal with that a little more when I speak about the mortgage rescue scheme. The way in which the schemes are currently defined suggests that local authorities are required under the Government rules to house only those people who are homeless in a narrow sense. As he implies, and he is absolutely right, many councils apply homelessness rules in a restrictive way because of their desperate shortage of housing stock. Indeed, many people who bought their home from the council will now find themselves homeless, unable to live in the home that they once rented. That is a double tragedy that we have all seen in our constituencies.

I congratulate the hon. Gentleman on his wonderful speech, which I am following closely. I am particularly grateful to him for mentioning the curse of negative equity. I want to highlight the fact that there are regional variations in the figures. There are real problems in areas such as the east midlands, where my constituency is located. The Fitch numbers that he mentioned show that 15 per cent. of home owners in the east midlands, and as many as 24 per cent. in the town of Northampton, are suffering negative equity. In many such constituencies, unemployment is now 80 or 100 per cent. higher than it was 12 years ago, so there is real pain and hardship in blackspots across the country.

That is certainly true, and many of us are aware that unemployment levels have doubled or more in our constituencies—albeit from a low level, but the increase has been alarming. The hon. Gentleman is also right that towns and cities in the east midlands are often the most affected. He mentioned his constituency but I believe that Northampton, Peterborough, Derby, Nottingham and Lincoln, for reasons that are not totally clear, appear to be affected worse than other parts of the country. I would guess that there was a temporary over-supply, and that private developers were too aggressive and underestimated the potential extent of a downturn in the market. He is right to draw attention to local variations.

Perhaps I could proceed from that point to review each of the elements in the Government’s intervention one by one. As I acknowledged at the outset, they have cumulatively had an impact and have generally been welcomed by people who deal with homelessness and the consequences of repossession.

The pre-action protocol was something that my colleagues and I specifically called for more than a year ago. I recall asking the Prime Minister about it in the Chamber. The Government have delivered a programme that gives the courts guidance to ensure that mortgage lenders take proper account of the circumstances of the borrower. It requires lenders to look at other options, involves financial advice and treats repossession as a last resort.

So far, there are some positive indications about the operation of the programme. The majority of judges appear to be taking it into account. There is feedback from a survey done by Shelter and Citizens Advice that more than half the mainstream lenders have adjusted their lending behaviour to take account of the improved court procedure, although, regrettably, only 20 per cent. of sub-prime loans invoke such a response. Having said those positive things about what has happened so far, it is fair to acknowledge that there are serious limitations on the scheme. Many of us hope that the Government will build on what they have already done.

First, lenders do not respond at all in a significant number of cases. That is particularly true in the sub-prime area, but not exclusively so. There appears to be no provision to deal with lenders who are wilfully non-compliant. Some lenders take no notice whatever of guidance from judges. They press for repossession and make no effort to help their struggling borrowers. What is probably required is a fresh round of guidance from the Government on how to deal with non-compliant behaviour by lenders. Perhaps the Minister in his reply could give us some indication of whether there will be any follow-up action.

Under that general heading, there is an acknowledgment that the pre-action protocol has exposed serious weakness in mortgage law in some key areas. Colleagues and others may wish to develop that point. There are two problems in particular. One is the extent to which a large number of borrowers are now exposed to repossession as a result of second charges, many of them for fairly trivial amounts of consumer borrowing, yet they face the loss of their home. The lack of protection in that area is palpable.

Then there is the kind of case that many of us are encountering in our constituencies in which there is default on a buy-to-let mortgage not by the resident but by the property owner. Large-scale default is taking place in the case of buy-to-let mortgages, and many tenants are being thrown out of their property at short notice. The Government have given some indication that they are preparing to legislate to provide more protection. It would be useful if the Minister were to give some indication about how and when that is due to happen.

My hon. Friend the Member for South-East Cornwall (Mr. Breed) suggested in the context of the Banking Bill a particular formulation for a new legislative framework to help buy-to-let tenants. Have the Government had an opportunity to review it, and how do they react to it as a legislative proposition?

To summarise, the initiative has been welcome, but there are severe limitations, and, of course, it has built up a pipeline of arrears cases without necessarily solving them.

Secondly, we move on to the mess of the mortgage rescue scheme, which is probably the least successful of the Government initiatives. The concept is an attractive one: enabling people to stay in their home as tenants or in a shared ownership arrangement. That is much preferable to existing rent-back arrangements in which some private landlords behave in a somewhat disreputable way towards people who have entered informal rent-back arrangements that are not properly regulated.

In theory, the Government’s scheme is attractive and we should welcome it. When it was introduced, we were told that it had the potential to help some 6,000 people. At the end of April, only two applications had been approved, which I know is a source of some embarrassment. Is the Minister in a position to tell us what the number is as of this morning? Numbers were supposed to have appeared today.

There are two big problems with the scheme as the Government are currently administering it. One is extreme complexity. All the financial advisers who have guided people with arrears problems into it have reported that whereas a private rent-back arrangement probably takes about a week to set up, which may be because some operators cut corners, the Government’s scheme appears to involve a five-month process, which is extraordinary. It is excessively legalistic, and I wonder what the Government are doing to streamline the exercise.

The other problem area is the one that we have already heard about from the hon. Member for North-West Leicestershire (David Taylor), which is that many families are excluded by a tight definition of homelessness. I have written to the Minister for Housing about a particularly bad case in my constituency of a father who has predominant responsibility for a daughter, but in the messy, complex arrangements that now exist for families that are breaking up, not full responsibility. He is not protected under the council’s—ultimately, the Government’s —definition of homelessness. What are the Government doing to make their definition of accessibility to the scheme more flexible? Clearly, there have to be some limits, but can they be applied more sensitively to make people in real need eligible for the scheme?

I congratulate my hon. Friend on securing the debate. Does he agree that to gauge the effectiveness of initiatives such as the mortgage rescue scheme, we need to ensure that the Government hold accurate records? The Minister for Housing assured me, in a written answer on 17 June, that only one household in Greater Manchester had been ineligible for the mortgage-to-rent and shared equity option, yet when I spoke to a person in Greater Manchester who is dealing with inquiries, I was assured that the vast majority of people who have inquired about eligibility have been told that they are not eligible for the scheme.

I understand that in April and May there were discussions around the country involving about 800 families. Such discussions are useful because they provide a way of delaying and possibly heading off repossessions. None the less, of those 800, only a tiny fraction are considered eligible, such is the tight definition of the rules. My hon. Friend’s experience in Greater Manchester is similar to that of other hon. Members around the country. That is why I am pressing the Minister to indicate that the Government are a little bit more open to flexibility in that area.

Thirdly, the mortgage support scheme, under which various lenders help in rolling up interest—in effect, to defer arrears problems—gives families facing short-term unemployment an opportunity to ride out the recession. The problem, which is reported to us by the voluntary organisations dealing with it, is that nobody is quite sure which lenders are operating the scheme and which are not. There is a strange kind of secrecy hanging over the scheme. There are no published data on which mortgage lenders are co-operating and which are not. Perhaps the Minister will clarify the Government’s position and tell us why there is no published list.

I gather that GE, which is one of the more controversial lenders and which has not been part of the scheme, is now saying that it will be part of it, but there is nothing in writing and no indication about when that involvement is to start. In addition, some of the small building societies are not parties to the scheme. Why is the list not published? Can there not be some indication about which lenders are involved in the scheme, simply to help the various advisers in citizens advice bureaux and other places, so that they know who is co-operating and who is not? That would make their lives and those of people in arrears easier, because at the moment there is something of a lottery and a great deal of uncertainty.

Fourthly, and finally, I should like to mention the ISMI scheme—income support for mortgage interest—which everybody concerned with this business accepts has been the most successful of the Government’s initiatives. The origins of that scheme lie in the fact that despite the urgings over the last two decades, few people have been able or willing to obtain mortgage protection insurance policies. Only 17 per cent. of all borrowers are covered by insurance, which is why, in a period of downturn such as the one we are in, large numbers of people are exposed. Bringing mortgage payments within the social security system provides a necessary fall-back for people in difficulty. There is some uncertainty about that. Perhaps the Minister will clarify the Government’s thinking. I understand that a two-year maximum is applied to the scheme. We are not yet two years into the crisis, but an awful lot of people in long-term unemployment will find themselves in severe difficulties once the scheme terminates. Do the Government have any flexibility in terms of the periods of time involved?

Is not the prime reason why 83 per cent. of people—to use the hon. Gentleman’s figure—do not take out mortgage protection insurance is that they read about the widely reported cases of the difficulty experienced among the 17 per cent. of people who do take out such insurance, when trying to claim on the insurance that they think they have, because of the hard-line and narrow interpretation that insurance companies sometimes place as barriers to legitimate claims made when people have problems with their mortgages?

The hon. Gentleman is quite right. An Office of Fair Trading review of payment protection insurance established that there was substantial overcharging in many cases, and poor consumer protection arrangements. The fact that people did not take out such policies is understandable.

If we in this country continue our preoccupation of ensuring that as many people as possible are owner-occupiers, perhaps we should try to ensure that in future mortgage borrowers are insured through a market mechanism of some kind. I was going to mention that later, but perhaps this is a suitable point at which to do so. Some interesting proposals are flying around. One is based on the Canadian model of pooled insurance—pooled guarantees—and another, called the home sale guarantee scheme, is being seriously considered. I hope that the Government are taking that matter seriously. The underlying philosophy of all those proposals is that an element of guarantee and insurance has to be involved in mortgages. The existing payment protection insurance schemes are not working, as the hon. Member for North-West Leicestershire rightly says.

In conclusion, I shall move on from the four schemes that the Government have introduced and look a little bit further forward and discuss how the underlying problems will be addressed. Repossession is only really a problem because of the underlying lack of available housing, particularly social housing. If social housing was freely available, repossession would not be the tragedy and disaster it currently is. Are the Government, working with the charitable bodies, doing any research at the moment on what happens to people whose homes are repossessed? I do not think that any of us know where those people actually go, although anecdotal evidence suggests that most of them go into the private rented sector, which of course presents problems of its own. Many people go into the private rented sector because they can then get housing benefit, which they found more difficult to get as owner-occupiers, but many of them are still in considerable difficulty.

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 Minister’s thoughts. I understand that the biggest leap forward in the housing supply is now likely to happen in the form of institutional private investors—pension funds and insurance funds—putting 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 presume that hon. Members will stay and intervene, or the relatively new Minister will have to make an extremely long speech.

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 Minister’s 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. Friend’s 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 Government’s 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 CML’s downgrading in the number of repossessions, we are still likely to see 65,000 repossessions this year, and if my hon. Friend’s 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 Government’s 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 banks—perhaps 50 per cent. of lenders—are 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 Government’s 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 outdated—it is mired in its 18th and 19th-century common law origins—and 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 Minister’s 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 lender’s 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.

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?

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 council’s 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 department’s 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 today—I presume that it will be made at the Local Government Association conference, unfortunately, rather than in the House—and 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 Queen’s 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 Minister’s 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 list—the 1.8 million families—will be sorely disappointed.

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 today’s 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 payments—we may not have reached that stage yet. The repossessions that we have seen often involve people who have taken out highly geared mortgages—perhaps 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 cohort—many commentators, including Shelter, have flagged this up—involves 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 pressures—not least job losses and interest rate rises—may, 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 family—the 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 affected—probably 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 have—I hope the Minister can update us—show 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 scheme’s 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 2009—four 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.

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.

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.

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?

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.

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?

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.

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.

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.

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?

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.

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.

As I said, my right hon. Friend will provide further details later.

The hon. Lady also asked about mortgage law. The Ministry of Justice has been reviewing it in response to concerns raised in connection with the Horsham case, which received some media attention last year, as she will recall. It will announce its conclusions shortly. Both she and the hon. Member for Putney (Justine Greening) asked about FSA regulation. I can assure them that the Treasury continues to keep regulation under review.

I am trying to help the Minister, because he has had to make a very long speech. The Government promised some time ago to regulate private buy-back and rent schemes and to bring them under the auspices of the FSA, but they still have not done that. Does he have any news on when that will happen?

In a rare moment of candour, I can tell the hon. Lady that, despite the fantastic induction into the Department given to me over the past few weeks, I do not have that information, but I shall find out and come back to her.

In conclusion, the Government are working day and night to do what is required to help households through these difficult times. We need to ensure that, wherever possible, families do not have to suffer the trauma and upheaval of repossession. People need to be reassured that we shall do everything possible to help all households at risk, so that they can benefit from the package of help that we have provided. We shall continue to put pressure on lenders to ensure that they support their customers, to strengthen and accelerate the delivery of the schemes that we have put in place, and to ensure that households know where to get help if they are struggling. At every stage, we shall show that their Government are on their side.

Sitting suspended.