There's a new sub-prime crisis, but it's not what you think

CapX:

A decade on from the financial crisis, the reports today about the sub-prime lender Provident Financial have given us a nasty case of déjà vu. Within the space of a year, its loan repayment rates have fallen from 90 per cent to 57 per cent – leading to profit warnings, the departure of its chief executive, and a collapse in its share price.



It feels like a frighteningly familiar story. Overstretched customers at the bottom of the economic food chain rack up unaffordable loans from greedy financiers. When the music stops, the credit failures cascade upwards, bringing down lender after lender until the whole financial edifice comes apart.



So are we facing a new sub-prime crisis? There are two conflicting narratives.



Cont....