Question: John Prescott recently unveiled his communities plan. What was the CML's reaction?

Peter Williams: Over all it was positive. We were particularly pleased the problems on housing supply were acknowledged, which is an area we believe has been neglected up until now. We were also pleased that the funding for market renewal was confirmed to help areas of low demand, particularly in the North and the Midlands. The increase in funding for affordable housing is also welcome.

The announcement did raise some question marks for lenders. For example, with non-traditional factory made homes (referred to as off-site manufacture). Our concern is with their long term mortgageability if they do pass into the private sector.

Our other concern is with the increased funding for arms length management organisations (ALMOS). ALMOS will be an alternative choice for local authorities to large scale voluntary stock transfers, where local authorities pass their stock to housing associations. ALMOS won't have a private finance requirement, stock transfers do.So, although the government has announced an increase in resources, one of the outcomes of the plan could be diminished use of private finance.

Question: What do you think of Prescott's record on regeneration?

Peter Williams: I'm reluctant to characterise England as two countries although that is what Mr Prescott seems to believe. However, we clearly have a problem of poor quality homes and over-supply in the North, while in the South there is inadequate supply. This contrast between too much stock in the North and too little in the South means that his interest in regeneration in the North has to be a good.

The only query we would have concerns the question over how you regenerate the housing market without regenerating economies. I think the absence of announcements by other government departments around economic regeneration is a major concern.

Question: Why has the north-south divide occurred?

Peter Williams: That's a very good question. The north has suffered from a decline of traditional industries, out-migration of population and a lack of investment. In contrast, the south has a substantial amount of locally-generated growth, national and international in-migration and of course a growing resistance to development. The cotton towns of East Lancashire are typical of the north and have been declining for decades. The housing markets in those towns have been propped up primarily by Asian migrants. But now what we are seeing is their second generation not wanting to live in poor quality properties of their parents. So, suddenly what looked like a sustained demand in those area - even though industry has declined - has actually begun to deteriorate quite rapidly.

Question: The government has also been keen to reform the planning system. What would you like to see them do?

Peter Williams: I think this is one of the great conundrums of contemporary life. We are in a position where house prices have been rising, but housing output has been falling. This is in direct opposition to the normal laws of supply and demand, where what you would normally expect to see, is increased demand leading to increased supply.

One thing that the government has done is to encourage more development on brownfield and more development to include a proportion of affordable homes. This is quite difficult for developers and house-builders. I think one of the dilemmas is trying to unravel the truth about whether the problem of under supply comes down to the weaknesses of the planning system or something else.

We [the CML] have just announced an initiative with the house-builders - the new homes warranties initiative - where lenders will require all new homes in the private sector to be fully certified and warrantied before they grant mortgages. This will reinforce the drive for quality in the private sector and we hope this will stimulate and reinvigorate the demand for new housing.

Question: Affordable housing is becoming a problem in London and the South East. Is this a nationwide problem as well?

Peter Williams: Yes, there are towns in the north, York and Durham for example, which suffer from the same problems with affordable housing as in London and the South East. However, half of the UK's housing market is in London and the South East, so this is a huge driver - it sets the tone.

The CBI said recently that worries about a collapse in the housing market were possibly to blame for the retail sector experiencing its worst three months for some time. Do you think the market is stable?

Peter Williams:We obviously share concerns about where the housing market is going, and war can only make the future even less certain. Views range from deeply pessimistic to overly positive. The whole issue about how the market feeds into consumption and the labour market, and how they interact is not fully understood. This is something which is not thought about enough and which, in the current climate, is key.

This is a new agenda and has to be thought through. That's why we are pleased that the government is beginning to address issues of housing supply - too much emphasis has been placed on demand.

On the general issue of debt, equity and house prices, it is quite clear that equity withdrawal has fed into consumption and has helped to sustain consumer spending. But quite a good chunk of this spending is put back into housing. A myth that needs eroding is the claim that too much money is spent on simply having a good time. Sadly, in my view, having a good time often comes back to DIY and housing-related things.

Question: What is the repossession rate in the UK?

Peter Williams: It's very low - we're now back down to 1982 levels. The government's long term prediction for housing repossessions in the private sector was 30,000 a year. We are now down to about 11,500, so we are well below this. Although some possessions are unavoidable, home-ownership has increased by more than a million households.

There are a number of reasons for this. The first is that in a rising market you can always sell up and move, second is that more people are protected by savings or insurance, and third that both lenders and buyers are more cautious. The key issue - the most important one - is that we have had falling unemployment so the macro-economic context has been very favourable.

In terms of going forward, there are some questions: is unemployment going to keep falling? Probably not. We could certainly end up with people being better protected and the procedures around it could be improved. I think on balance we are as close to the bottom as we are going to get.

We may go down another thousand or so, but it's very hard to see that it will fall much further. Not least because the government's communities plan announced a task force on increasing home-ownership which is primarily about low income households which may feed into modestly higher possessions in the future. Having said that, we don't think it will go that far - interest rates will probably remain where they are and a relatively stable economy will further improve matters.

The CML and lenders are not complacent. That is why we recently announced a new sustainable home-ownership target to reduce the number of possessions over the economic cycle. In practice, this means trying to keep the average annual number of possessions below 30,000 - the average over the last 10 years is nearly 35,000 - or lower than they would have been in comparable economic circumstances in the past.

Question: What state support is there for home-owners?

Peter Williams: We've tried to map out private and public protection. The problem with state support is that you have to wait nine months to get it, so you can be in real difficulty by the time you start receiving it. And of course lots of people are not eligible to receive state support in the first place. In the last recession only 25 per cent of those who became unemployed were eligible. So it has always been a partial safety net, albeit an important one. In terms of insurance, 25 per cent of households have mortgage payment protection insurance. Something like £300 million a year is going from insurance into sustaining people in their homes. This is now almost as much as is contributed by state support.

One key step that the government could take would be to improve the scheme for payment of income support for mortgage interest for borrowers in most difficulty. The FSA's mortgage rules should also do more to encourage borrowers to think about how they could manage any changes in their circumstances.

In the meantime, we are urging borrowers to claim any tax credits they are entitled to. There is about £1 billion for eligible home-owners which is not being claimed. Tax credits will help prevent people from getting into arrears in the first place and will sustain their income in a way that income support does when you have no income. We see tax credits as vital and we are trying to develop a programme with the Inland Revenue to enhance their take up.

Question: The process of buying a home in Britain can be very drawn out. What would CML like to see changed about it?

Peter Williams: The government is very interested in reforming the buying and selling process and has just published a draft Housing Bill to introduce "Home Information Packs" as part of the selling process. The process is traumatic however long or short it is. The problem is, if you make it too short people won't have time to reflect and if you make it too long they won't be happy about it. So it's about striking a balance.

The time taken has come down. While Britain is not as quick as in some other countries, it has a much bigger and more developed owner-occupied market and much greater frequency of movement. One of our main problems is with 'chains' and the complexities arising from this are significant.

We believe that technology and the electronic transfer of documentation will solve a lot of the problems. We are keen to see government push forward on automating land searches with local authorities. Although they do have a target, it is someway off and is not fully funded. If we can get all parties involved - estate agents, lenders, solicitors, local authorities - fully automated this would significantly reduce the time taken to buy and sell property.

Our concern about the government's proposals basically comes down to the requirement for a home condition report to be supplied within the home information pack - this is a pack of information on the property which the seller will need to put together before the property goes on the market. The government would like the home condition report to replace the lenders' valuation. But the people undertaking these reports may not necessarily be properly qualified and may not have professional indemnity. So if they do something wrong the lender may have no recourse - this is obviously not the case with a qualified surveyor.

There are a lot of detailed technical issues around the reform of the home buying and selling process, but we will try to work closely with the government to try and sort through them. We all want the system to improve, where we disagree at the moment is on what is the best way to improve it.

Question: Flooding has increasingly been a problem in recent years. What impact has this had on mortgaged households?

Peter Williams: Well it hasn't yet. The weird thing about this is that the places which have experienced flooding have often had above average increases in house prices because of the popularity of living by water. However, I think that as flooding becomes more frequent and people become more aware of it we will begin to see a negative impact on house prices.

To deal with this, we need adequate flood prevention and better house-building techniques. For example, don't build with wooden timbers in flood-prone areas, build with stone instead. Lots of other countries which experience regular flooding have a built environment that deals with it. Britain has stuck with traditional methods which has resulted in properties which are not flood-proof.

We are also still waiting on government and the Environment Agency to publish adequate maps on flood risk. The current maps are bizarrely designed to panic people. They show too many people are prone to flood risk, because they don't take account of flood defences already in place.

This links back to the government's communities plan. We have had an announcement that half a million new houses are planned for the Thames Gateway for example. But the area has inadequate flood defences. There is a real need for joined up thinking between the different government departments - in this case DEFRA and ODPM - to address these type of issues.