As I chained my bike up outside the Bannatynes Gym yesterday, visiting for my 20 minutes of swimming and 40 minutes of coffee, cake and read of the papers, I noticed that a new, white, Audi A3 was parked in the staff spaces. I noticed because it was parked next to another white Audi A3 (age indeterminate, private registration) which itself sat next to a white Audi A4. And next to that, was the manager’s white Audi A5 Coupe. Four white Audis, all immaculate, gleaming and sparkling in the sun.
“Old Duncan Bannatyne must be paying his staff decent wages!”, I said to myself, chuckling as I remembered reading his autobiography and thinking that Duncan certainly knew the value of a pound. Especially if someone else was spending some of his. One of his staff stated Duncan used to count the paper clips in the office, and one of the most memorable scenes in his book is when he loses it with a consultant who’s travelled to see him and billed him for First Class travel on the train. So had Duncan suddenly decided to pay his staff top-end wages so that most of them could afford an Audi? Or, alternatively, maybe his staff were champions of frugality? What are the chances of that? Exactly. Most of his staff are young, fit, healthy and endlessly positive, the type of people who are absolute prime candidates for saddling themselves with boatloads of debt.
Let’s be honest, I did it myself. When I started earning a real wage back in Thatcher’s Eighties, one of the first things I remember was applying for a Mastercard (or rather an Access Card as it was called then.) I had a big list of stuff that I wanted and I had no problem with going into debt to get it. After all, I was saving money too, a cash fund that I was building to help purchase the item at the top of my wish list – a place of my own.
To buy a flat, I needed a deposit. There were no 100% mortgages in those days, a quite sensible situation I believe we have returned to now. I think I needed to find 5%, so it wasn’t a massive amount of money but it still required some serious saving. Once I had amassed the appropriate amount, I applied for a mortgage knowing that the maximum I’d be allowed to borrow with my 5% deposit would be 3.5 times my salary. The rules were pretty clear and no exceptions were made to them. In addition, I was well aware that my Access balance would need to be zero when I made my application because any other debt you had would be set against and deducted from the potential loan.
With a mortgage to pay and a deposit that cleared out the savings I had, I was very thankful for my Access card. It provided a good bit of additional purchasing power. It seemed clear to me that debt was both necessary and good. Debt worked. It got me stuff that I could otherwise not have immediately afforded and, as one of Thatcher’s children, I wanted stuff now. Yes, I wanted that hi-fi system for my flat, I wanted those new clothes for the weekend and I wanted that holiday in Spain with my mates. And I would have them, and Access would help.
I would have wanted the equivalent of a white Audi A3 too, no doubt, but frankly that would have been out of my league. Audi’s were around then, for sure, but it was BMW that ruled the roost. A BMW Series 3, preferably black, was what every young man about town craved, but there was no way I could have borrowed that amount of cash on my wage. And I’m not even sure I would have, even if I could have. While amassing a pool of debt looked quite tempting, there was quite a few official restrictions still attached to it but, more than that, there were social restrictions too – my parents, for example, frowned quite heavily upon it. “Never a borrower or a lender be” was one of my dad’s favourite sayings. Suitably warned, I never went daft with the plastic.
Today many young people don’t tiptoe into the debt pool. They dive, head first, from the highest board they can find, encouraged to do so by their peers, the banks, the retailers, the internet, you name it. If they’re a student, in England, then the Government builds them a massive board to start with, just to get them into the swing of things. Debt is now not just a way of life, it is THE way of life. Once you have a forty grand debt burden from your education – and what has that got you? – then thirty grand more for an Audi seems not only manageable, it actually seems like a relatively good deal. At least you will have something tangible to show for it.
As for a mortgage, I have no idea what the lending rules are these days. Given that the average wage in the UK is around £25,000 today, if you apply that old lending criteria of 3.5 times your salary then you’d have £87,000 to add to your deposit. With the average UK house price sitting at £272,000 today, then you’d “only” need to find a deposit of £185,000 to buy it.
Perhaps the best idea then is to go and buy that new Audi – but choose a bigger model, because you might end up having to live in it.