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Trouble brewing

Bad news in financial services is a little like our British weather – you can see it coming for ages but it still catches us unawares. We all stand around and twitter about how bad such and such is, we even write about it in trade papers but still nobody ever takes notice. Then when it does go belly up, it is simply brushed aside with breath-taking arrogance.

Take consumer debt and spending. Only now are we starting to see programmes on TV about the property market taking a turn for the worse. The buy-to-let bubble, the credit crunch and the introduction of Hips are the 1988 equivalent of the loss of double Miras and high interest rates.

You only have to believe half of what the media say to understand that there is something very smelly about to bob to the surface. But where is the modicum of foresight from our “governors” in this unholy mess?

Just over two years ago, I wrote in this very column that lots of consumers out there were storing up a huge and debilitating problem for the future. I suggested that homeowners were blissfully ignorant of the need to put in place a sensible repayment strategy now that there is no compulsion to do so. The critical point here, of course, is that the cost of servicing a loan has become vastly cheaper now that a punter no longer has to pay the blasted thing back.

Perhaps I have a hidden talent for seeing the blindingly obvious? When groups of dishevelled looking shoppers stand around salivating at £500 flatscreen TVs in Asda, you have to ask what the blazes is going on in their minds? Are they brainwashed into thinking they can have now and never pay?

Have they seen a certain ad from a major bank saying: “We could help you get what you need when you want it.” It shows a woman dreaming about a four-poster bed from the comfort of her modest single. Perhaps she is about to embark upon a lusty new phase of her life or maybe the copywriters have got it the wrong way round?

It seems that society, not to mention ad agencies, have permanently transposed the words need and want. Trust me, there is something very peculiar going on out there.

This ad was a bit of a eureka moment for me. I had to look twice at the tiny wording with its huge meaning. Everyday life is being permeated with the message that we can have instant gratification without the consequences.

I cannot quite understand why the warnings signs are never acted upon. Is it bamboozled focus groups who are too small in number to ever be meaningful? I fear the problem with this sort of research is that they are just that – focused, unlike most of the rest of us out there.

So, for the benefit of the FSA, here it is again – you have a huge problem brewing. Millions of consumers have no way of repaying their huge mortgages. They have foolishly felt rich because their house values have inexorably gone up. This manifests itself as a mass-delusion of (material) happiness, where people spend money that keeps our politicians and regulators in taxpayer-funded jobs with gold-plated pensions (and kitchens). Why would anyone want to stop that gravy train?

The Government and the regulators have fallen for the oldest trick in the book. They have gambled on house prices always going up.

But I have an answer. In my never ending, yet fruitless quest for something uplifting to write about, I think I might have hit on something that could also be of personal gain. If the FSA would like to hire me as a “reality consultant”, I am open to offers. I would warn them up front, though, that I am very expensive but it would be money well spent. Guess what my first suggestion would be? Re-introduce the link between a loan and a tangible repayment strategy. No strategy, no loan. Easy, hey?

Tom Kean is director of Thameside


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