A round-up of parliamentary business during the week beginning 25 November:
The housing market came under the spotlight even more (if that’s possible) than usual this week, not least as a result of the Bank of England’s latest financial stability report which focussed heavily on the market.
Coinciding with this report, the Treasury and Bank of England announced changes to the terms of the Funding for Lending scheme to re-focus it towards supporting business lending. From 2014 the incentives for mortgage lending will be removed, reflecting the improvement in funding market conditions that has been experienced in recent months.
Meanwhile, in a session on the Bank’s latest inflation report, Mark Carney told the Treasury committee that the Bank did not see marked improvement in the supply of new homes. He suggested the main obstacles to housebuilding were Britain’s difficult planning regime and the shortage of construction materials. Asked if the higher rates of mortgage lending is a concern, Dr Carney pointed out that rates were at 75% of historic averages, but that it was important that under-writing standards are maintained.
We also got clarification of the Bank’s role in the help to buy mortgage guarantee scheme this week. The Treasury committee published a letter from Dr Carney in which he confirmed that the Bank of England has no power of veto over help to buy. Responsibility for the scheme lies with the Government. The Bank will offer advice only with respect to any risks that may be posed by the scheme to financial stability, and to the safety and soundness of firms. The Bank could already, and should, offer such advice whenever appropriate.
Launching his revised housing strategy for London for consultation, the mayor said that housing supply has become the biggest challenge facing London’s economic development. Boris Johnson announced initial new funding of more than £1 billion to deliver thousands more low cost homes as he warned that London needed at least 42,000 homes a year to meet the demands of the city's increasing population.
And the Welsh government launched Help to Buy Cymru on 25 November. The scheme is now open for pre-registration of builders, and will be open to customers from 2 January 2014.
The big legislative event this week was the Lords’ attempts to re-write the Banking Reform Bill during its report stage. On day one, a range of opposition amendments were debated concerning issues around ring-fencing, full separation, and professional standards and licencing, the latter being narrowly voted through. There was also a debate on payday loans with a number of references to their impact on customers’ future potential to get a mortgage. During the debate the government confirmed that it is committed to implementing a cap on the high cost of credit in January 2015. The second day of the report stage debate saw the government commit to review the structure of the regulatory decisions committee and agreed to bring forward an amendment on third reading to ensure regulators regularly meet with auditors.
The Water Bill had its second reading, with many MPs referring to flooding and flood insurance during the debate. Similar concerns to our own were raised by about the lack of detail in the Bill about how Flood Re and the government’s insurance obligation will work in practice. Responding to the debate, environment minister Dan Rogerson said, “draft clauses have been available for some time and much of our work in committee will be based on them. Were we to delay the Bill after this second reading debate, we would not be able to deliver our programme in a timely fashion… It is my intention that [the flood insurance clauses] will be available for the committee to look at as soon as possible, but we have to get them right and make sure that they deliver what the government and my predecessor agreed with the industry, so that we deliver effectively”. The government amendments were published on 28 November.
In advance of the Autumn Statement next week, the Labour Party introduced an opposition day debate on the cost of living, urging the government to take action to ensure economic recovery delivers rising living standards for all.
The Scottish government published its white paper outlining how it foresees an independent Scotland working in advance of the Scottish referendum in September 2014. The main proposals impacting on the mortgage lending industry are:
- The continued use of sterling as part of a formal monetary union with the rest of UK;
- A financial regulator would be established in Scotland
- Financial stability policy would be conducted on a consistent basis across the sterling area. The paper sets out a number of alternatives for achieving this.
- Financial conduct would be discharged by a Scottish Regulator taking over from FCA. It would work on a closely harmonised basis with UK regulators and it is envisaged this would include the application of single rule books and supervisory handbooks.
- Compensation schemes would be funded by an industry levy and there will be an equivalent of the financial services ombudsman.
And finally, the think tank IPPR published a report on the green deal which outlines the problems with the scheme and sets out a new framework. Amongst its recommendations are mortgage interest rate subsidies and government guarantees for green mortgages.
For information on our public affairs work, contact Michelle Vosper.