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Repossession and Mortgage Arrears

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 homeowners 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.