---

Repossession and Mortgage Arrears

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 help 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.