00:00Sprinkling of your finances is just as important as sprinkling in the house.
00:03The issue is when it spirals out control.
00:06Nobody thinks that a credit card is actually debt.
00:14Welcome to The Big Question,
00:16the series from Euronews addressing some of the biggest topics in the world of business.
00:20Today I am joined by Kevin Mountford,
00:22co-founder of saving platform Raising UK to discuss all things debt.
00:26Thank you so much for joining me today, Kevin.
00:27So I think a lot of people feel a lot of shame about discussing debt,
00:30but it's actually incredibly common.
00:32How many people in Europe are living in debt right now?
00:34If you look at Europe as a collective,
00:36there's around $7 trillion of debt or of borrowings.
00:41And I think that's a big difference
00:43because we're all used to borrowing money for different reasons.
00:46I think the issue is when it spirals out control.
00:49But if I break that down to an individual level,
00:52that's around $10,000 per person.
00:54If we look at the amount of borrowing to income,
00:58then that's where it can become a bit of a challenge.
01:00So across Europe it's about 97%,
01:03but you've got some countries like the Netherlands, Norway, 200% plus.
01:08Yes, the income is higher in some of these jurisdictions,
01:11but the borrowing, relatively speaking, is higher as well.
01:14So the issue is not borrowing in itself,
01:18but that borrowing going out of control
01:19and debt that we no longer can manage.
01:21Thinking about the most common reason that people are borrowing
01:32and getting into debt aside from mortgages,
01:34what is the kind of most common cause of debt?
01:36I think credit cards generally, you speak to your friends
01:39and nobody thinks that a credit card is actually debt.
01:43It's just the way we live our lives.
01:44We all look at our bank statements and realise with contactless
01:48how much we've spent that we haven't really thought about.
01:52And to boost the economy,
01:53as governments are now looking at increasing the thresholds on contactless.
01:58So in the UK it's generally £100,
02:00but if that starts to increase,
02:02I think we need to be far more disciplined
02:04in managing our household budget.
02:07I don't know about yourself,
02:08but through the years as my salary's gone up,
02:10I've not really been any better off.
02:12The more I earn, the more I spend.
02:14When that gets out to control,
02:15that's when you've got a real problem.
02:17And do you think there's a kind of financial literacy problem
02:19and a lack of education in schools
02:21that's kind of partly to blame?
02:22So we carried out some research at Raisin
02:25and it showed that there was a lack of understanding
02:28over things like what's inflation,
02:30what's standard variable rate on a mortgage,
02:32what's AER, APR, etc.
02:33The problem is if you've not got that awareness,
02:37you don't feel empowered and in control
02:39to make the best use of your finances
02:41so that plays into the hands of the banks
02:44and other financial institutions
02:46and we become very apathetic
02:49and we don't change products as readily as we should
02:52so that in itself creates a problem.
02:55Yeah, and do you think social media plays a role
02:57in contributing to debt in younger generations?
03:00Social media can be a cause for good
03:02in so much that you can find information
03:05but there's promotional adverts in front of you
03:08day in and day out
03:09and I think that the problem being
03:11it creates more immediacy on the back of your aspiration
03:14and don't forget the ease of which you can buy things online now.
03:19I've got friends that struggle to sleep
03:21so what do they do in the middle of the night?
03:22They go online and they start buying stuff.
03:24Oh gosh.
03:24So that's where the likes of social media
03:27and the kind of immediacy of new technology can create problems
03:32so we just have to be careful.
03:34What are the long-term ramifications of getting into debt at a young age?
03:37Worst extreme is you can face bankruptcy,
03:40get assets seized,
03:41but also your credit scores.
03:42When you're older in particular,
03:43you might want a mortgage or you might want a car loan, etc.
03:46That's going to go against you
03:48so the worse your credit score is
03:49then you fall into kind of subprime categorisation.
03:53The interest levels you get,
03:55people are prepared to give you money
03:56but you'll have to pay more for it
03:58so it becomes a downward spiral really.
04:00So for those already in debt,
04:02what are the key steps to take to get out of debt?
04:04Accept the fact that you're in debt.
04:06What you don't want to do is compound the problem
04:08by allowing the debt to get out of control.
04:11So talk to somebody,
04:12don't bury your head in the sand.
04:13If you've got a loan provider,
04:15it's your mortgage, unsecured loan,
04:17wherever it might be,
04:18talk to them.
04:18There might be ways of rescheduling your finance
04:21to ease the burden a little bit.
04:24There are ways you consolidate loans.
04:26So what happens is you pay the loan back
04:28over a longer period
04:29but your outgoings are reduced.
04:31So there's different ways of tackling this.
04:33There's certainly people out there
04:35that would try to take advantage of your situation.
04:38So if you need any debt-related advice,
04:41there are charities out there.
04:42There's a way of getting free advice
04:44as opposed to paying for it
04:45because you don't want to be paying for something
04:47when you're struggling with finance to start with.
04:49For people who maybe do manage to pay off debt,
04:51what do they need to do going forward
04:53to stay out of debt?
04:54I think it really is about budgeting.
04:57Sprinkling your finances
04:58is just as important as sprinkling in the house
05:00or whatever.
05:01I've just changed car insurance.
05:03I've saved £130.
05:05I've just changed broadband provider.
05:07I've saved £500 a year
05:09or whatever the case may be.
05:10It's money in my pocket
05:12as opposed to the bank
05:13or the insurance provider
05:15or whoever it may be.
05:16But I think quite an interesting thing
05:18is maybe as a family
05:18or as a group of friends,
05:20why don't every quarter or six months
05:22sit down over a bottle of cheap wine
05:25because you don't want to overspend?
05:26But why don't you just have a look
05:27at your outgoings?
05:28Have a bit of a competition
05:29trying to reduce it.
05:31What are the next steps
05:31to create a kind of
05:32positive financial situation going forward?
05:34I think awareness, education,
05:37real understanding the terminology,
05:39getting to a point
05:40where you feel empowered.
05:42So, you know,
05:42raising as a savings platform.
05:45Taking the UK as an example,
05:47there are hundreds of millions of pounds
05:49sitting in accounts
05:50paying 1% or less.
05:52From our platform,
05:53you could get three, four times that.
05:55That's money in your pocket
05:56and not in the bank's pocket.
05:58So just do something about it.
06:00You've got deposit guarantee schemes
06:01across Europe
06:02that's protecting your savings
06:04up to certain limits.
06:06So there might be a brand
06:07that you don't recognize
06:08and you stick with a high street bank
06:10because you think your money's safer.
06:12Well, in some respects,
06:13that might be the case.
06:14But with under the deposit guarantee scheme,
06:17whether it be 100,000 euros,
06:19whether it be 85,000 pounds,
06:21your money's protected.
06:22So go with the regulated entity
06:24that you might not know,
06:26but you'll get a better return on your savings.
06:27Looking across Europe in the future,
06:29what is the economic outlook
06:30and how is that going to affect us?
06:32I think it's a challenge
06:32and it's a challenge
06:33because if we look at it globally
06:35at macro level,
06:36we've still got conflicts around the globe.
06:38You've then got the ramifications
06:40of the Trump regime
06:42and that we possibly could have a trade war
06:44with tariffs
06:45and retaliation from countries that are affected.
06:48So from a central kind of banking perspective,
06:51one of the tools they've got is interest rates.
06:54So we saw that inflation was double digit,
06:56so they put up interest rates,
06:58means there's less money available,
07:00so we spend less because it's supply and demand.
07:02Inflation is coming under control,
07:04but there are potential issues
07:05because of this trade war situation.
07:07And I think the European Central Bank
07:09will, as we get into the summer,
07:11reduce rates.
07:12There is a view that it'll get down to 1.75%.
07:14It was over 3% back in the last year.
07:16So if you bring inflation down,
07:18that kind of cost of living crisis reduces,
07:21interest rates come down,
07:22then anybody who's got borrowing linked to interest rates
07:25will end up having lower payments.
07:27So all of these are positive steps.
07:29So for a lot of people
07:30that are facing debt challenges,
07:32that'll be a consequence
07:33of high interest rates and high inflation.
07:35As they ease,
07:36some of those debt levels will naturally reduce.
07:39So let's hope
07:40that when we get into the summer,
07:41then that eases the debt burden
07:43on households across Europe and beyond.
07:46Well, thank you so much for your insights today.
07:48And thank you very much
07:48for joining me on The Big Question.
07:49Thanks for having me.
07:52Thank you.
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