Fool's Gold

We are in the middle of a strange phenomenon. House prices have been pushed up and up. They have risen at nearly double the rate of earnings over the past 35 years. If house prices had increased at the same rate as inflation the average house would cost about £60 000, and not three times that amount.

What this means is that people, while paying off debt, have a perception of wealth. They view their lives through a veil of unreality called – house price – and fail to see clearly. That terraced ex-council house may be valued at £160 000, but it is still an ex-council house. The type of place that, 20 years ago, ordinary folk could afford to live in, pay their rent, pay their bills and stay out of debt. Now people, living in the same house, ostensibly owning it, struggle to pay the mortgage, accumulate additional debt, may be trapped in a job they don’t like, and can’t move, because it’s not that easy to sell an ex-council house.

But having been fooled into believing that because the house has a high value, people are then seduced into ‘releasing equity’, or securing other loans on the house, or taking out non-secured loans.

This in turn is fuelled by the rampant consumerism, or affluenza, that is afflicting Britain today, which is promoted by the media and by the retail industry. The plethora of TV programmes about home improvements, together with ‘buy now pay nothing for 12 months’ deals lure people to over commit financially on things that they probably don’t need. Rampant consumerism hits all areas of peoples’ lives and this, combined with an obsession with following, and copying, celebrity lifestyles further condemn people to higher and higher levels of debt. Recent reports show that many women over 35 have accumulated debts of £8,219.

Debtor's Prision

The term ‘homeowner’ is often a misnomer. For many owning a home is really about managing a huge debt. The way in which language is used is misleading, especially within the realms of the financial services world – ‘credit’ usually means ‘debt’. Mortgage means debt. And for many people debt equals worry.

Britain is fast-becoming a debt-laden society, which means that people are seriously constrained in their life choices. If there is a commitment to debt then this impacts on what jobs people can do, the hours people need to work, time spent with their families and so on. Debt in Britain is reaching alarming levels, with the current figures of debt secured on homes being around £1.2 trillion.

Unsecured debt in Britain is about twice the average in Europe. Far from being a nation of homeowners, Britain is fast becoming a nation of debtors.