UK sees rise in pawnbroking as inflation rises

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The higher cost of living has created increased demand from borrowers looking for small loans, leading a number of people in the UK to explore the options available through pawnbrokers.

There has also been a crackdown on high-interest lenders, which has left customers with fewer options, according to the Financial Times. reported Friday (July 29).

According to the report, listed companies offering “pawnbrokers,” or small loans secured on things like jewelry and watches, saw good sales and good profits, pushing up stock prices. For example, shares of H&T Group – Britain’s largest pawnbroker – have risen 37.6% this year, and rival Ramsdens has seen an 8.6% increase.

“The cost of living, yes, that’s absolutely what drives the need to borrow, but I think the bigger of the two issues is that people have fewer options available to them,” said said H&T chief executive Chris Gillespie. “People’s need to borrow has returned…but that need has returned in a market where the supply of small-value credit is massively reduced.”

When using pawnbrokers, consumers typically pay them a higher interest rate than they would for a street loan, although less than a payday lender. The report notes that those who do not pay will see ownership of their asset transferred to the pawnbroker, who could sell it.

Around 130 members of the National Pawnbrokers Association run 870 outlets in the UK, representing around 97% of the industry. Many of these companies profited from the fall of subprime lenders or unconventional financing providers, which performed well after the 2008 financial crisis.

This all comes as consumers shed their savings cushions as the cost of living rises, pushing people to look for different ways to earn a quick buck.

See also: As savings dwindle, paycheck-to-paycheck consumers are 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 reduce their retail purchases, weighing current concerns with long-term concerns.

Low-income shoppers are likely to be the most vulnerable, with 63% of consumers earning less than $50,000 a year saying their finances are likely to deteriorate over the next year.

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About: Results from PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a collaboration with PayPal, analyzed responses from 9,904 consumers in Australia, Germany, UK and USA. and showed strong demand for one super multi-functional app rather than using dozens of individual apps.

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