City slammed by PM for cheap mortgage ads


Political Editor

The Prime Minister has condemned Birmingham City Council for advertising “irresponsible” mortgages to council tenants.

Gordon Brown said he would investigate, after the authority included advertisements for mortgages aimed at people with a history of bankruptcy, in a free newspaper distributed to residents. He was urged to act by city MP Gisela Stuart (Lab Edgbaston), who highlighted the advert in the House of Commons.

Recent issues of the council’s newspaper, called Forward, have included adverts offering mortgages to people with “adverse credit”, rent arrears and bankruptcies. They state: “Buy your council house - right to buy mortgages, no upfront fees!”

But the wording of the adverts makes it clear that they are aimed at people who have had difficulty re-paying debts.

They also promised mortgages for people on “disabled benefit income”.

A version of the adverts published in October included a promise that applicants would not need to provide proof of income.

This has been removed from more recent issues of the newspaper but the adverts still state that the mortgage offer is open to people who provide “self-certification”, which is effectively the same thing.

The practice of selling mortgages to people who had not provided proof of their income is seen as one of the main causes of the economic crisis facing the world today.

Lenders in the US offered mortgages to people who could not afford to pay - known as sub-prime borrowers - and then sold on the debt to other financial institutions across the world. These so-called toxic debts collapsed in value when it became clear that many borrowers were set to default on their loans.

The advert came from a business calling itself Council Home Loans, and invited potential applicants to telephone a “helpline”, giving a Solihull number.

Speaking in the House of Commons, Ms Stuart asked: “Does the Prime Minister agree that it is right for councils to go on encouraging their tenants to take up mortgages which they can ill afford to repay?

“If he thinks it is wrong to encourage people to take up mortgages who are only on benefits, are in arrears or who have been bankrupt, will he please tell Birmingham City Council, which is controlled by the Conservative Party, that they should stop taking advertising in their own council tenants’ freesheet for companies which facilitate just such loans?”

Mr Brown said: “In any area where there is irresponsible lending practices we must look at that very carefully, and I will look very carefully at what she says about Birmingham City Council.”

The council said production of Forward was sub-contracted to Trinity Mirror Midlands, publishers of the Birmingham Post and Birmingham Mail.

Debra Davis, director of Public Affairs and Communications, said: “Forward typically has six pages of city council human resources adverts and when this space is not filled the advertising space is currently sold by Trinity Mirror Group, the contracted publisher.

“However, we do have a process in place to check Forward before it goes to print. We typically focus on editorial content. Regrettably this advert slipped through the system.

“We have taken immediate steps to ensure extra scrutiny of all advertising within our civic newspaper and corporate publications.”