“Obviously he’s handsome but I find him an intriguing person, too,” explained John, 32, who claims that her husband, a computer engineer, is happy to tolerate her love of all things Reeves. “Keanu rarely speaks about himself or his innermost feelings, which adds to the mystery.”
Flying around the world to see the enigmatic actor — she gave him a kiss at the Cannes film festival — is expensive, but affordable thanks to easily available credit.
To finance her passion, John has taken out £20,000 of loans from her employer, the Halifax, at 6.9% interest. “The fact that money is cheap to borrow has been a big factor,” she said, “It has all been worth it — Keanu actually recognises me and gave me a wave when I was in Los Angeles.”
John is part of Britain’s boom in borrowing to fund not essentials but lifestyles, hobbies and eccentric fascinations. It is a phenomenon fuelled by the lowest interest rates for 48 years.
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Take Peter Mossman, a 58- year-old accountant and keen hot-air balloonist. He has just remortgaged his home in Bristol, releasing £200,000 for a country cottage in Monmouthshire with a garden large enough to take off from.
“I thought, why the hell not,” said Mossman. “Maybe I’m part of the ‘live for now culture’, but I’m confident that I can pay it back.”
Joanne Edwards, 27, a casino worker from Margate, is also using easy credit to fulfil her aspirations. She took out a £5,000 loan with the Alliance & Leicester for a breast enlargement operation. “I always wanted to have my breasts made bigger, and as I am not very good at saving I decided to get a loan,” said Edwards. “I had them increased from a 34A to a 34C last week and I’m really happy with the results.”
A spokesman for the bank said: “We quite often lend money for cosmetic surgery. It’s one of those things people really want but often cannot afford to pay for in one go.”
Some experts are worried. Has the pay-later culture got out of hand? Or will an era of sustained low interest rates and more sophisticated borrowing allow a soft landing?
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THE days of negative equity and repossessions that blighted the early 1990s have been largely forgotten. Attitudes to borrowing have changed and, as mortgages have become more affordable, consumers have happily taken on larger debts. The student loans system has made borrowing a part of life even for the young. To some experts this is a healthy development.
“Consumers should be empowered to spend their lifetime earnings when they want to,” said Malcolm Hurlston, chairman of the Consumer Credit Counselling Service. “The role of credit is to put people more in control of their lives. It’s a normal part of the life-cycle.” Banks and other lenders have become more sophisticated in credit arrangements; they say credit-scoring allows them to price risk more accurately and thus offer credit to a wider range of borrowers.
For their part, consumers are becoming more adept at using credit. “People have become used to using debt as a convenience, paying a bit back when things are good, borrowing a bit more when things are bad,” said Andrew Burrell, an economist with Experian Business Strategies.
Adam Beck, 27, a financial adviser with the mortgage management firm Chase de Vere, shows how a savvy consumer can exploit the myriad special offers and introductory deals. Earning £25,000 per year, he has a £57,000 mortgage and has financed the purchase of a £4,000 second-hand sports car, a £2,000 jet-ski and 50% share in a £9,000 speedboat using cheap credit.
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Beck’s trick is to take advantage of the very low or zero introductory interest rates offered by credit card companies. When one runs out, he switches to another.
“Someone might spend three years saving up for something, but if I see something I want, I buy it. I may pay interest, but I’ve had those extra years of enjoyment,” he said.
Such attitudes underlie new figures showing that borrowing in Britain rose by a record £10 billion last month. The growth in personal debt is roaring along at 14% a year.
On average, households have debts of £45,000, made up of £33,000 in mortgage and £12,000 in credit cards and loans. But this average disguises the fact that many owe far larger amounts.
Experts are divided on the risks. “There isn’t a ‘paying back’ crisis among borrowers at the moment,” said Hurlston.
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The City firm of Capital Economics pointed out, however, that typical household debts amount to 130% of income. It is worried that consumers will not afford to pay debts if interest rates rise.
John Butler, an economist with HSBC, said: “We are creating something that is unsustainable.”
John McFall, Labour chairman of the Commons Treasury committee, has also sounded a warning, reminding borrowers how easy it is to get into difficulties. “Some people are tiptoeing into disaster because of the ready availability of credit,” he said.
Many firms offer tempting gifts to encourage consumers to take out loans. Some credit card companies send their customers cheques to use to spend extra cash in case shops will not accept their cards.
Amid this flood of money, personal bankruptcies hit a 10-year high last week. Although rule changes have made bankruptcy an easier escape route for those in financial trouble, some see this as a warning sign.
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Patrick Boyden, of accountants Price Waterhouse Coopers, said: “The sharp increase in personal insolvencies should ring alarm bells about the downside of the expansion in consumer credit.”
The problem for the Bank of England, which sets interest rates, and the government is that consumer spending is a powerful force in keeping the economy rolling along. Reining in the credit boom by making borrowing more expensive could have wide and painful consequences.
Along with even a small hike in interest rates, economists fear a drop in house prices and a rise in unemployment, and there are already signs of both. Any of these three factors could mean consumers borrow less and spend less, leading to an ever-faster vortex of redundancies, further falls in spending and tumbling house prices.
Vicky Redwood of Capital Economics, said: “The reason to be worried is the risk that consumers might suddenly think, hang on, we’ve taken on too much debt here, and that would lead to a wider readjustment where consumers start paying off debts and spending less. All it would take is for house prices to fall, or a slowdown to occur more rapidly than we’ve been thinking, then that will prompt them to cut back on their debt.”
In a worst-case scenario, the bogeymen of arrears, negative equity and repossession would stalk Britain again, with a fast-unravelling economy. David Page of Investec, an investment house, said: “It’s not hard to construct a very nasty scenario.”
Redwood doubts that the worst will happen: “We think houseprices will fall and unemployment will rise, and we don’t think that households have taken these things into account when taking on such a high level of debt. It wouldn’t be suprising if we saw some rise in arrears and repossessions, but we’re not going back to the case in the early Nineties when there was huge negative equity. But just because it’s not as bad as it was then, it doesn’t mean the picture is all rosy.”
FOR some, the crunch has already arrived. Helen Spencer, 52, a retired schoolteacher from Leeds, amassed debts of £111,531 with 17 credit cards, eight store cards and seven accounts with catalogue firms. From a net pension of £1,000 a month she pays £400 into a debt repayment scheme.
“The letters came through the door offering credit cards and I didn’t think there was much harm in taking them up,” she said. “When I see adverts on TV about loans it makes me so angry. Everyone wants that little extra freedom to spend but I want people not to be taken in and to look at the interest rates and read the small print before signing.”
Jason Grey (not his real name) is a 30-year-old sales manager struggling to pay off debts of £17,000. Married with a three-year-old son, he earns £45,000 a year but has a £200,000 mortgage on his house in West Sussex.
“My spending got out of hand when I was 24 and I became a recruitment consultant,” he said. “I had to have the best suits — Armani or Hugo Boss — the best phone, and nights out would be meals at top London restaurants. One of the most extravagant things I bought was a £150 pen and I spent £800 on a watch, which is stupid money.
“I’d max up my credit card and then get another and another. Then I got loans out with the intention of paying off my cards but ended up blowing the loans on nights out and clothes.”
Grey now spends £700 a month on paying off his debts.
Temptation still rules, however, for Marion Elliot, 48, from Chatham, in Kent, who has used credit to help to pay for a Mazda sports car and an £800 DVD player.
“We deserve to live comfortably,” said Elliot. “For my 50th we’re going to the Maldives or the Seychelles.”
How will she pay for the holiday? “Well, it may have to be on the credit card.”
Additional reporting: Rick Hewett, Jessica Berry
How Britain has roared into the red