Have you ever been in a discussion with someone who simply will not accept that what you are telling them is true? I ended up this situation at a neighbour’s BBQ. Knowing that I was in the business of mortgages, a friend said how horrified he was to hear on the news that mortgage arrears in the UK were predicted to rise to 30% by the end of this year. He wanted to know how lenders could get themselves in a position where one in three borrowers were unable to keep up with their mortgage payments.
I said arrears were predicted to rise by about 30% from 129,800 to 170,000, out of a total of more than 11 million borrowers. I explained that, in percentage terms, it was actually an increase from 1.1% to 1.45%, which – although not good news – was not quite as bad as the figure they thought they had heard on TV.
But he was having none of it. He was convinced what he had heard on the news was true, and if such important information had been presented by Hugh Edwards or Trevor McDonald, then there was no disputing it.
I am not suggesting the national news had presented incorrect data. However, I do believe the data was presented in a way which made it look as sensational as possible.
The same principle goes for most statistics relating to the housing and mortgage markets. Month-on-month increases or falls can sound a lot more sensational than presenting annual trends.
Unfortunately, it seems on occasion the purpose of the news is not to inform and educate in an accurate and balanced manner, but to simply maximise viewer ratings by putting out hard-hitting and attention-grabbing headlines.
There is a danger that by only focusing on the sensational, we contribute to bringing about the scenarios we most fear. Could a constant focus on bad news stories about the economy undermine consumer confidence and actually contribute to the downturn, turning into the recession we all fear?
The media needs to restore some balance and to give the upside as well as the downside to information they present. It is no different to financial institutions having to give balanced information to customers about the products and services we sell.
So how do I think financial and economic stories should be reported? Well, take house prices. Yes, prices are falling and most forecasters are predicting that by the end of 2008 prices will end up between 5% and 10% lower than where they started at the beginning of the year. As a consequence, some borrowers will face the prospect of negative equity, which is not good.
However, there is a danger that because of the way the news is presented, the majority of homeowners believe negative equity is a real and present danger for them, which is simply not true.
Falling house prices are also good news for some. Those first-time buyers who have struggled for years to get a foot on the housing ladder are starting to see property prices become more affordable.
The same applies to people wanting to move into larger properties. The fact their existing home might have dropped by 5% in value is more than compensated for if the more expensive property they want to move into has a similar fall in value.
I do accept that as a general rule, it is bad news that sells newspapers and good news rarely makes the front page.
However, presenting information that might be accurate but is nonetheless sensationalised runs the risk of creating significant problems for people, companies and the country as a whole.
It might put businesses at a commercial disadvantage, and worse still, it might directly contribute to bringing about the market conditions which we all fear most. n
