I always feel sorry for Marley’s ghost in Charles Dickens’s 'A Christmas Carol.' He wore a heavy chain he had unknowingly forged in life. Unlike Scrooge, Marley had not received ghostly visitors to warn him of his future burden.
Marley’s chain was made up of 'cash-boxes, keys, padlocks, ledgers, deeds and heavy purses wrought in steel.' The chains many people are forging today are made of high mortgages, shiny new cars, and bundles of credit cards. And we are dragging these heavy debts with us into the uncertainties of the post-Brexit world.
Low interest rates have not only scuppered the plans of those living off savings. They have also given borrowers a false sense of security, making them dangerously comfortable with big debt. Mortgage lending has soared to its highest June level for eight years, with total loan advances reaching £20.7bn, says the Council of Mortgage Lenders.
And people have been racking up unsecured debt on credit cards and personal loans faster than at any time in the last decade. New car sales, powered by cheap deals, reached an all-time high of 2.63 million last year. Statistics from The Money Charity show average debt per household including mortgages is nearly £55,000.
Even in good times, death, divorce, and illness can hamper an individual’s ability to service debts. But recession could be knocking at our door, bringing with it job losses. Britain’s first health check after the Referendum, the Purchasing Managers' Index, showed a 'dramatic deterioration' in the economy. And the G20 summit was dominated by economic worries heightened by Brexit.
When interest rates rise - indeed the Bank of England might raise them soon to stave off inflation stoked by dearer imports - it will be an almighty shock for many. Those suffering most may be people who bought their first homes after 2007, so have never experienced rate rises. Even if we navigate Brexit successfully, sooner or later something will happen that makes people unable to meet their debts. A crisis is waiting to happen.
Who is to blame for our over-indebtedness? Some banks will deservedly get it in the neck for irresponsible lending. Some have occasionally been behaving a little like loan sharks. In particular, criticism will be heaped on their new risky breed of credit cards. These offer those transferring balances from another card an interest-free period of three years or more, at end of which exorbitant charges kick in. They can be great tools if debts are paid off before the interest-free time expires. But they effectively allow people to put existing debts on hold while accruing new ones.
Banks are making money on the misery of the financially illiterate, the desperate, and those living for today at tomorrow’s expense. OK, banks are in business to make money. Indeed, those of us with bank shares in our pension pots are delighted they do. But do they have to be so sneaky about it?
Here I must give a shout out to Royal Bank of Scotland boss, Ross McEwan, for ending teaser rates, declaring: 'We will not be in the business of trapping people in debts they cannot afford.' I would much rather banks end the charade of free banking and charge money upfront. And in return I’d like them to provide a proper, transparent service. I fervently hope that as well as being busy making money, they are currently also hatching plans to help customers should the worst happen.
But there can be no irresponsible lending without irresponsible borrowing. Many people, like Marley, have made their chains of debt 'link by link' of their own 'free will'. Learning to see through the deals that sucker people in will stop some making the same mistakes. Schools should increase their efforts to teach finance. But we also need a fundamental shift in attitude about debt.
Debt makes makes modern life go round. Few of us could afford homes and cars without it. But while it is sometimes a necessary burden, it is a dangerous one, something to be minimised and ditched as soon as possible. We must stop seeing debt as normal, though this is a tall order for those leaving university with student loans, and the poor with low credit ratings for whom buying a new washing machine means going into hock. Borrowing for fleeting material pleasures is madness.
Years ago, when I was paying a mortgage single-handed, and denying myself even tiny treats, I couldn’t understand how people on similar salaries afforded fancy clothes and holidays. Did they have a private income, I wondered, naively, out loud to a friend? 'Don’t be daft,' she replied, 'they’re using plastic.'
I hoped and expected my income would one day increase, but I spent as if it would not. I followed Mr Micawber’s advice in Dickens’s David Copperfield: 'Annual income, twenty pounds, annual expenditure nineteen pounds nineteen and six: result, happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six: result, misery.'
Lynne Bateson is a freelance writer and journalist. She was a national newspaper financial editor and consumer columnist.