OUTLOOK: Get it right while the number of distressed borrowers is still low

The Financial Conduct Authority is worried, and very with good reason.

It’s seen the reports warning that a frighteningly large number of people will struggle to manage their home loans if interest rates rise even a little bit. Not only will there be a spate of horror stories, but a spike in home repossessions could have a very nasty effect on the economy.

Guess who will be in the firing line if that happens?

Hence yesterday’s FCA “thematic review” into the way lenders are dealing with people who are already in difficulty. 

Get it right when the number of distressed borrowers is still mercifully small and we might just about be able to weather the storm when interest rates rise and their numbers grow.

But it’d help even more if the review wasn’t being conducted in such a vacuum.

Lots of people who have mortgages also rely on their small businesses to provide income to make their repayments. Businesses financed through small business loans. 

The watchdog might want mortgage departments to transform themselves into cuddly purveyors of tea and sympathy, but that won’t do a lot of good if no one is keeping an eye the wolves in the distressed business department or the business support service or even the global reconstruction group. 

Because if they deprive a mortgage borrower of their income, well that’s the mortgage done too. The debt collectors and the repo men won’t be far away (although the thematic review would prefer it if they smiled a bit). 

The dichotomy between the treatment of mortgage borrowers and small business borrowers - are often one and the same person - is striking.

Ah but, says the regulator, we don’t regulate small business loans. So it’ll be someone else’s problem unless someone tells us it’s ours. 

Perhaps someone should get around to doing that. Authorities such as Treasury Committee - which has just launched inquiry into small business finance  - have recognised the issue. 

But it will require the Treasury itself to shake itself out of its torpor to get this beyond the talking stage. Happily inflation is still low, and the Bank of England has once again said it doesn’t foresee a rate rise soon. So there’s still time. It’s just that the sands in the hour glass are starting to run a bit low.