Housing: Shared Ownership

Baroness Gardner of Parkes Excerpts

Monday 25th October 2010 Lords Chamber

Asked By

[Baroness Gardner of Parkes]

To ask Her Majesty’s Government what they expect to be the effect of the limitations on shared ownership for first-time buyers as set out in the Financial Services Authority’s policy statement A Specialist Sourcebook for Building Societies, published in March 2010, stating that a maximum of 15 per cent of a building society’s whole mortgage book will be available for non-prime owner-occupied mortgages.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, the regulation of building societies is a matter for the Financial Services Authority, which is an independent body. I have, however, raised this question with the FSA and I understand that it has written to my noble friend, explaining how it uses its Specialist Sourcebook for Building Societies.

[Baroness Gardner of Parkes]

I thank my noble friend for that Answer, but is he aware that the 15 per cent limit also covers buy-to-let, commercial and social landlords and equity release schemes, so an awful lot is crammed into it? The problem seems to have arisen because the FSA says that this is guidance but building societies have said at a recent meeting of 14 major and minor societies that individual supervisors from the FSA have insisted that this was an absolute maximum and that there was no question of discretion. Will my noble friend clarify that this is just guidance?

[Lord Sassoon]

Well, my Lords, the FSA, and what my noble friend has reported it as saying, must stand for themselves. I cannot directly answer for the FSA. However, my clear understanding is that the source book offers guidance on the way that the FSA undertakes its regulation and does not consist of formal rules. Indeed, for those societies with advanced risk management systems, there is not even an indicative limit on the level of shared ownership in which they can engage. As I understand it, building societies can lend within their statutory limits. They can undertake any lending up to their statutory limits provided they have appropriate controls in place.

--- Later in debate ---

[Lord Sassoon]

My Lords, it is important that we have diversity and a variety of providers of financial services. In that context, building societies of course have an important role to play—particularly in the area of shared-ownership mortgages, which is the subject of the Question. Many building societies continue to offer products in this area, and I welcome that.

[Baroness Gardner of Parkes]

Will the Minister confirm that, in spite of what my noble friend Lord Forsyth said, there is a self-limiting situation, in that someone applying for shared ownership can have the mortgage for their percentage of ownership tailored exactly to an amount that they can be sure of paying?

[Lord Sassoon]

My Lords, questions about what people can afford to pay are essentially for the mortgage provider to judge in the context of its commercial decisions, made within the responsible lending guidelines set down by the FSA.