MS: Housing Market Support

[Samuel Gallagher]

Mr Speaker,

With leave, I rise to make a statement on recent financing authorised by the Treasury in support of the housing market.

Mr Speaker, ongoing turbulence in financial markets has impacted the housing sector. At this point, estimates provided by the Treasury suggest that house price inflation is set to be negligible in the coming year. Indeed, across the country, numerous homeowners have found themselves trapped in negative equity. As these levels increase, we are beginning to see the number of homeowners in arrears on their mortgages increase and the number of homeowners in default on their mortgages increase. Concerningly, Mr Speaker, we are beginning to see an increase in repossessions.

The government is concerned by these trends and will be acting accordingly. To this end, we are acting to support the construction of housing and support homeowners who may find themselves unable to pay their mortgages. These actions are designed with the goal of stimulating employment in the construction sector and protecting consumers that may have been offered loans that are not in line with good lending practices.

In achieving the first goal laid out, Mr Speaker, I have authorised £500 million to be released to the Department for Communities and Local Government to finance the construction and refurbishment of social housing and housing association stock. £50 million of this funding will be made available for the purpose of weatherisation, insulation, and improving the energy efficiency of social housing and housing association stock - however, the Secretary of State shall have authority to modify this purpose if needs must.

Second, I have authorised a loan scheme to assist those who are nearing or more than three months in arrears on their mortgage payments and in financial hardship. Under the Mortgage Support Loan Scheme, homeowners in arrears on mortgage payments will be able to seek a government financed loan equivalent to the amount that they are currently in arrears plus the equivalent of up to six months of future mortgage payments. Following a one year grace period, homeowners will be offered a menu of options that will see this loan paid back within five years of the grace period ending. Up to £150 million will be allocated for the Mortgage Support Loan Scheme at this time.

As funds are released under the Mortgage Support Loan Scheme, we will evaluate existing requests for support. In the event that there is limited uptake, the government will expand the scope of the programme to allow homeowners with negative equity on their homes to pay off significant portions of their mortgage using low-interest financing made available by the Treasury. The criteria for such payments will be announced should we take this decision. Should funding exist, I anticipate it being targeted towards the lowest income homeowners, and especially those on variable rate mortgages that face interest rates that far outstrip growth in earnings.

Third, Mr Speaker, I am announcing the release of funds for a Relief to Rent Scheme. It is clear that, for some, temporary mortgage support would not provide a feasible solution to resolving debt issues or the threat of repossession over the long term. To account for this, the government, via the Department for Communities and Local Government, will introduce the Relief to Rent Scheme. Under this scheme, financing will be made available, in full, to local authorities and housing associations to purchase the home and clear the debt of the homeowners, particularly low-income and working class families, and rent to the homeowner at affordable rates, consistent with the tenants of social housing and housing associations across the country. £250 million will be allocated for the Relief to Rent Scheme at this time.

Mr Speaker, the Treasury is holding an additional £100 million in reserve for release to programmes announced today. All monies announced today will be authorised for release from existing appropriate reserve funds in the Treasury.

It is clear, Mr Speaker, that this is a temporary solution. We are acting today to stabilise the housing market and provide support for families and homeowners who find themselves in a financially difficult position. However I must be clear, these are not handouts. There are terms attached. We hope that, for a large number of families, these initiatives will prevent repossession and allow them to achieve more stable financial footing. Both the Treasury and the Department for Communities and Local Government will continue to monitor the housing market for signs of additional stress and will act accordingly.

A long-term solution will involve more thorough oversight of the mortgage market and the types of mortgages being made to British families. Appropriate regulatory regimes for financial conduct and lending will need to be put into place. The government is consulting on such proposals and will table legislation in the future. The priority today, Mr Speaker, is the stability of the housing market and the protection of consumers. We are confident that we will achieve these ends.

I commend this statement to the House.