All about investment

Mark Shephard

Barclays is preparing to reduce its exposure to consumers with low credit ratings in the so called sub-prime market, as recent interest rate rises put yet more pressure on the debt laden UK public. The company looks set to exit all its sub-prime activities, after placing a raft of businesses selling these services under review. This portfolio includes Firstplus, the specialist loans business that has drawn criticism from consumer groups, and Clydesdale Financial Services, its retail finance arm.

In the US sub-prime market, house repossessions have reached a record high, and many lenders forced into bankruptcy. This has worried UK analysts, who fear the same may happen here. In addition, the Financial Services Authority (FSA) warned last week it had found extensive evidence that consumers are being mis-sold sub-prime mortgages, and has even taken action against the five worse offending firms in the sector.

Clive Briault, the FSA's managing director of retail markets, warned that "poor sales practices in this market may lead to serious wider consequences".

With recent data showing that repossessions are treble what they were three years ago, and lenders being accused of mis-selling sub-prime mortgages, we are seeing a frightening echo of the crisis in the US market. With further rate rises on the horizon, a correction in the housing market looks probable, although not a certainty.

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