UK Sees Surge in Pawnbroking as Inflation Continues to Rise

Higher living costs have created more demand from borrowers looking for small loans, leading a number of individuals in the United Kingdom to explore the options available through pawnbrokers.

There’s also been a crackdown on high-interest lenders, which has left less options for customers, the Financial Times reported Friday (July 29).

Per the report, listed companies offering “pledge lending,” or small loans secured on things like jewelry and watches, have been having good sales and profits, adding to share prices. For example, shares of H&T Group — the biggest U.K. pawnbroker — have risen by 37.6% this year, and rival Ramsdens has seen an 8.6% surge.

“The cost of living, yes, absolutely that’s driving the need to borrow, but I think the larger of the two issues is that people have got less options open to them,” said H&T chief executive Chris Gillespie. “The need of people to borrow has returned ... but that need has returned into a market where the supply of small sum credit is massively reduced.”

When using pawnbrokers, consumers typically pay them a higher rate of interest than they would for a high street loan, though less than a payday lender. The report noted that those who fail to pay will see their asset’s ownership passed to the pawnbroker, who could sell it.

About 130 members of the National Pawnbrokers Association run 870 outlets in the U.K., which comes down to around 97% of the industry. Many of those companies have benefited from the fall of subprime lenders or nonstandard finance providers, which did well after the 2008 financial crisis.

This all comes as consumers are losing their savings cushions as the cost of living rises, pushing people to seek different ways to make cash quickly.

See also: As Savings Dwindle, Paycheck-to-Paycheck Consumers Especially Vulnerable

According to PYMNTS’ “Consumer Inflation Sentiment: July 2022 — Consumers Pull Back and Prepare for the Long Haul” report, 70% of consumers plan to scale back their retail buying, weighing current concerns with long-term worries.

Lower-income buyers will likely be the more vulnerable, with 63% of consumers earning less than $50,000 per year saying their finances will likely get worse in the next year.

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