LOTS of people are getting anxious about their debts. Or so say the chief executives at mortgage lenders who see this as a major cause of the housing market slowdown. Aghast at the amount they have spent on their credit cards, the already over-mortgaged are reluctant to embark on the purchase of a larger property with a supersized home loan. They are not disenchanted with bricks and mortar, refusing to watch TV property shows or minded to visit www.housepricecrash.co.uk, the online haunt of those convinced of an imminent collapse. They are just taking a reality check.

One consequence of this new mood is the ready availability of good mortgage deals: lenders are vying for a slice of a smaller home loan market. This is good news for people who are looking for a mortgage. They also have the chance to learn by the mistakes of the over-indebted, whose blunders included short-termism.

Currently there is little difference between the price of two and five-year fixed-rate deals, as we report on page 14. Yet most borrowers will still opt for a two-year offer, thinking that they will grab something even better when it runs out. But if there is an upward surge in interest rates, they will be adversely affected. A homebuyer with a £150,000 loan who took out a two-year 3.40 per cent in 2003 must now be content with a rate of 4.95 per cent. The extra cost is £1,500 a year.

If our buyer had chosen an interest-only mortgage, paying back none of the capital, his outgoings would be more modest. But this short-termism could have nasty long-term consequences. Hundreds of thousands of people are not putting aside money to repay their interest-only mortgage at its term, hoping that something will turn up to clear the debt. But these are many of the same people who see their property as their retirement fund and so are not investing in pensions. The choice will be to sell the home to repay the loan and live in penury, or continue with a mortgage into their dotage, as the Japanese do. The only comfort will be that, by then, TV will have finally moved on from property shows.

Learn from Life’s past mistakes

EQUITABLE LIFE is back in the news, but then it never went away. There are frequent reminders of events at the insurer, if only in the determination of money managers to show that they are better custodians of our savings than Equitable’s past management.

For example, this week the Financial Services Authority, the City watchdog, issued a warning about venture capital trusts (VCT), currently a fashionable, but often risky, type of tax-efficient investment— put in £10,000 and you will benefit from £4,000 of tax relief. The FSA fears that these concessions are attracting people who are neither rich enough nor tough enough.

This alert was timely and sensible, but still you could not help remembering the FSA’s decision to stay silent between 1998 and 2000 about the implications of investing with Equitable. The company was facing court action over its guaranteed annuity liabilities, the battle that would bring about the near-ruin of the business. But the FSA appears to have let itself be persuaded by Equitable’s management that the company could easily be sold if the outcome of the legal action was not favourable. As a result, several thousand people felt able to entrust their savings to Equitable. The Financial Ombudsman this week ruled that this late-joiner group deserves compensation, a decision that Equitable’s new board may fight. The payment of redress would further deplete Equitable’s with-profits fund on which 750,000 individuals are still relying for their pensions.

Equitable’s investors will have their day in court next month, although the action against the past directors may take as long as six months. The outcome should provide some lessons on how an insurance company should be run and regulated in investors’ best interests. But the Equitable saga has already provided some useful guidance. Anyone contemplating any investment should not rely solely on an institution’s supposedly illustrious name. If you are thinking of putting money into a VCT before tax-year end, study the FSA’s opinion (www.fsa.gov.uk), then research the market on sites such as www.allenbridge.co.uk. You cannot eliminate all risk from any financial decision, but you owe it to yourself to learn from the past.

Come on now American Express, that won’t do nicely

We report on the strange case of Ali Razak. Mr Razak has never had an American Express charge card. Yet for months, he has been pursued by American Express for £3,781 in charge card debts run up by an Ali Ali Razak.

The mix-up may have resulted from a clerical error. Maybe an identity fraudster stole our reader’s name and address. But, whatever happened, debt collectors threatened Mr Razak, an investment manager, with legal action. All most alarming, especially as this kind of episode leaves a black mark on your credit record — even if you are innocent.

When we contacted American Express, it said that it would call off the debt collectors. But the bank’s handling of the affair continues to be troubling. Why did it tell Mr Razak that it could do nothing for him, claiming that the matter was in the hands of debt collectors? Is it taking steps to ensure that his credit report is properly corrected? Has its behaviour throughout been what we expect of a bank that is signed up to the Banking Code? We think not.