People borrowed 20% more from pawnbrokers in the past year as cost-of-living crisis bites
The value of loans taken out from pawnbrokersas jumped 20% in the past year, with lending increasing from £144m to £174m says Mazars, the international audit, tax, and advisory firm.
The figures show that 24,000 more people have turned to pawnbrokers for loans in the past 12 months*, an 8% increase from 316,962 to 341,302.
Paul Rouse, Partner at Mazars, says spiralling inflation is making it harder for people to stay on top of their bills, with more people having been forced to look for short-term loans to cover unexpectedly high costs.
Paul Rouse says: “The cost-of-living crisis is taking a big bite out of household finances. More people are finding that they need quick access to small loans to keep up with rising costs and are being forced to turn to pawnbrokers.”
Since the start of the pandemic the Financial Conduct Authority has tightened its restrictions on high-cost consumer credit, such as doorstep lending. This has led to a surge in growth among pawnbrokers as more people with weaker credit histories need short-term loans but have fewer options for finance.
Adds Paul Rouse: “The cost-of-living crisis is leaving people in serious financial stress. More people are in need of quick cash. Due to low numbers of lenders now targeting borrowers with weaker credit histories, pawnbrokers can seem like the easiest route to securing that cash.”
“The measures outlined in the Chancellor’s September mini-budget are also unlikely to provide much immediate assistance to people most likely to be resorting to pawnbrokers to stay on top of their bills.”
In pawnbroking loans, individuals give up their valuables in exchange for money with the option to reacquire the asset once the debt, plus interest, is paid. However, if the loan is not repaid in full on time, then the pawnbroker becomes the legal owner of the asset.
* Year-end May 31 2022. Source: Financial Conduct Authority