The financial disservice industry

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The Independent Online
House prices are shooting up: 2.8 per cent last month alone according to the Halifax price index. The annual rate of house price inflation is almost 11 per cent, approaching the boom levels of the 1980s. In theory, this is good news for anyone with a property in a desirable part of the country, which means London and the South-east; my house in west London has doubled in value since I bought it four years ago. But I don't want to sell and even if I did, I'd have to buy something just as expensive nearby or move hundreds of miles to realise any capital - effectively a one-way ticket once you step off the fast-moving London price escalator.

Interest rates rose last week for the second time in three months, a trend that seems likely to continue. This will mean more expensive mortgages, at a time when some home-buyers are discovering that the endowments they were persuaded to take out will not redeem their loans unless they start paying higher premiums now. The Secretary of State for Trade and Industry, Stephen Byers, is rightly incensed about this development and other scams operated by building societies and banks. The Personal Investment Authority ombudsman, Tony Holland, says people who were sold endowments without being made aware of the risks could be entitled to all their money back.

It is a repeat of the pensions mis-selling scandal in the 1980s, which left many workers worse off than if they had stayed in company schemes. Insurance companies have had to pay out millions in compensation, and the same thing may happen as a result of the endowments fiasco. But what the Government seems reluctant to admit is that mis-selling is not an occasional event but endemic in the financial services industry. It is impossible to purchase even a simple item like a dishwasher without being urged to buy a hugely expensive insurance package, sometimes costing as much as a third of the product itself.

When I moved house in 1995, I got first-hand experience of the pressure placed on purchasers by building society staff who wanted to sell endowments, pension mortgages and mortgage protection policies - anything, in fact, apart from the simple repayment mortgage I needed. One building society manager, desperate not to let me escape without buying a product which would earn him commission, even suggested insuring my hands. "So what would stop you working?" he demanded when I declined this bizarre offer, which seemed more appropriate to a concert pianist than a freelance writer. "Total loss of my brain," I snapped.

Naturally some unscrupulous estate agents have got in on the act, telling would-be purchasers they cannot view properties unless they agree to an interview with a financial adviser. What they are exploiting is the understandable anxiety of someone trying to move house, sometimes in emotionally charged circumstances like a divorce. The result is a climate of perpetual insecurity, so that even the most conscientious citizens cannot be sure they will be able to pay off their mortgages at the end of the loan or retire without a sharp drop in their standard of living.

That is without taking into account the effect of the dramatic north- south divide in house prices, which limits mobility, especially now that large-scale public housing projects are a thing of the past. And what about all those people who simply can't afford mortgages and personal pensions? Instead of worrying about whether they've taken out the right policy, they're stuck with guilt for not heeding bossy Govern- ment advice about prudent fiscal behaviour.

The better-off have little choice but to rely on a financial sector which brazenly stimulates anxiety, with one insurance company currently producing adverts which ask parents what would happen to their children if they died suddenly. Even people who can afford their own homes, in theory at least, have little reason to feel sanguine. They've been abandoned by the state into a cut-throat housing market, financed by a rapacious industry whose object is maximum profit, not security for the poor consumer.

YOU MAY by now have been scared witless by The Blair Witch Project, the low-budget horror movie which has been an unexpected box-office hit. Or you may, like me, have been baffled by two questions. When the students set off into the woods to make a documentary about eerie goings-on, why don't they take a mobile phone? And why are the supernatural events in the film so banal? It's not exactly difficult to put a pile of stones outside somebody's tent or a bit of slime on a backpack. Now if I was a ghost in a movie, I'd want to do something really clever, like making Tom Cruise look sexy.

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