§ 7. Mr. Ottaway
To ask the Chancellor of the Exchequer if he will make a statement on the marketing of low-interest mortgages.
§ The Economic Secretary to the Treasury (Mr. Anthony Nelson)
The form and content of advertisements for credit, including mortgage credit, are governed by regulations made under the Consumer Credit Act 1974. Those regulations are intended to ensure that advertisements convey a fair and reasonably comprehensive indication of the nature and true cost of loans to prospective borrowers.
§ Mr. Ottaway
Is my hon. Friend aware that building societies offering low-interest mortgages—I have an example here of one of 3.6 per cent.—are also insisting that it is compulsory to take out captive insurance for the building and contents? Is he aware that the premiums for such captive policies are way above the market rate, which explains how the mortgages can be offered at such a low cost? Does he agree that that is misleading for the financially unaware? Will he please investigate the matter?
§ Mr. Nelson
I am aware of the advertisement to which my hon. Friend draws my attention. I assure him that the Government are, and would be, concerned about any instances of unfairness and disadvantage in the selling of tied-in products. The Director General of Fair Trading and the Department of Trade and Industry are looking at the tying-in provisions of the Courts and Legal Services Act 1990. A balance must be struck between increased consumer protection and increased costs to businesses. I assure my hon. Friend that the authorities and I will look carefully at any particular examples that he and others draw to our attention.
§ Mr. Betts
The Minister will no doubt argue that mortgage rates have come down since Black Wednesday; the Government can point to that fact. However, many of my constituents are currently paying virtually the same rate for their personal loans as they were paying in September 1992. The banks have simply profiteered from falling interest rates during the period. What action have the Minister and his colleagues taken in the intervening period 1019 to raise the issue with the banks and to encourage them to bring personal loan rates down, which would benefit many of my constituents?
§ Mr. Nelson
The hon. Gentleman should know that the former Chancellor of the Exchequer raised the matter on a series of occasions with the leaders of the commercial banks. They, in turn, responded with codes of practice about announcing reductions in the rate of interest and sought to explain that they had adjusted downwards their rates of interest. However, it is undoubtedly true to say that they have taken the opportunity somewhat to widen their margins from their previous levels.