---

Repossession and Mortgage Arrears

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 as 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 the Government have been in office less social housing has been built than in the past 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.