Everyone must be catered for in the financial future

9 November 2009

Gerry O’Brien Managing director Home of Choice

The past few weeks have been a roller coaster ride that has taken us from the sublime to the ridiculous.

First, we discovered that our banks were patting themselves on the back and rewarding themselves with £6bn worth of bonuses.

Then the Financial Services Authority published its Mortgage Market Review which revealed that there was no apparent read-across to the Retail Distribution Review.

Meanwhile, the Council of Mortgage Lenders said that although lending in September was up 2% compared with the previous month, it was down 27% on the same period last year.

We also saw a flurry of mortgage products come to market with higher LTVs and it was rumoured that chancellor Alistair Darling was preparing to announce almost forgot, yet more industrial action by postal workers was threatened.

So while on one hand we’re seeing an upturn in the financial markets not only in a freeing up of lending but also in terms of more innovation being displayed and deals being struck, on the other we are seeing ordinary people - our clients - preparing for a continuing onslaught on their finances.

This could be in the form of further redundancies, rising fuel bills, crippling transport costs or higher fees for lending products.
Yes, it is good news that there has been an increase in the number of house purchases but as the CML points out, the figures are not likely to rise much further.

Taking this together with the continuing rise in unemployment we could be looking at a vast swathe of consumers who will never be able to get their feet on the first rung of the property ladder.

The decline in remortgaging is worrying too, as many families have come to expect this facility. It’s what they have been taught to demand by consumer champions in the past couple of decades as a way to free up capital and ease the pressure on their finances.

To ordinary people it seems indecent that top bankers are again being rewarded with big bonuses when they are supposedly the architects of our doom.

To reinforce the absurdity of the situation, the government promised that the era of excessive bonuses was over for good. It seems banks are choosing not to listen.

The return to big bonuses signalled to some - and obviously the chancellor was one of them - that the recession was over. As I have pointed out, it is a matter of perception whether this is true or not.

So will the fallout from the review alleviate or acerbate the situation?

It’s a good start but one of my concerns is that we could be preparing to price ordinary consumers out of the market.

Flexible products and identity checks conducted by lenders will add to costs which will be passed on to consumers. So it’s not just about whether mortgage brokers can justify charging fees - it’s also about who will be able to afford them.

As we prepare for the post-crunch environment we must be careful to remain inclusive or society will fragment. And nobody will be a winner if that happens.