Chancellor reassures societies

NORMAN LAMONT yesterday reassured building societies that National Savings rates were not being aimed to scoop up personal savings at their expense, writes Vivien Goldsmith.

The Chancellor also told societies they would be allowed to set up their own insurance companies to provide cover against mortgage defaults.

The societies were concerned that National Savings rates would be pushed so high to help the Government fund its debt that savings would be drained from them.

Last summer when the First Option Bond, aimed at basic-rate taxpayers, was launched, the societies warned that they would be forced to raise mortgage rates to allow them to increase savers' rates to stem the outflow. The bond was later withdrawn.

The cost of mortgage indemnity insurance, which has to be paid by buyers borrowing more than 75 per cent of the property value, has resulted in huge losses for insurance companies as homes have been repossessed.

At present the societies are barred from owning more than 15 per cent of an insurance company. The change announced by the Chancellor, who was speaking to the Council of Mortgage Lenders in London, comes too late for most societies to seek approval from their members this year to move into insurance.