Pawnbroking surges in UK amid value of dwelling squeeze

The shoppers that stroll by the doorways of Ramsdens pawnbrokers use the lending service in starkly other ways.

“We’ve acquired an excellent buyer [with] a platinum Rolex, which might be price about £50,000 [or] £60,000,” mentioned Peter Kenyon, the corporate’s chief government. “He’s a builder and when his money circulation is brief he offers us the Rolex, borrows between £10,000 and £20,000 . . . pays curiosity at 2 per cent a month, then pays us again when his money circulation improves.”

However Kenyon famous the chain additionally assists clients who want small sums as a result of they’ve “acquired to feed the children, or purchase the varsity uniform”.

The UK’s pawnbroking sector is reporting robust post-coronavirus lockdown progress, as quickly growing dwelling prices enhance demand from debtors searching for small loans, whereas a crackdown on high-interest lenders has left clients with restricted choices. Listed corporations that supply “pledge lending” — sometimes small loans secured on property similar to jewelry and watches — have reported robust progress in gross sales and income, boosting their share costs in current months.

Shares in H&T Group, the UK’s largest pawnbroker, have risen 37.6 per cent this 12 months, whereas these in rival Ramsdens are up 8.6 per cent over the identical interval as of the shut of commerce on Monday.

Kenyon mentioned weekly buyer numbers inside Ramsdens’ retailers have been 20 per cent larger than pre-pandemic ranges: “Lots of that’s pushed by what the patron [is] dealing with and the value of dwelling improve, however we lend for a raft of causes — we do lending to companies . . . we’ve lent for varsity charges.”

H&T this month mentioned its pledge e-book — loans linked to a buyer’s asset — was price £84mn in June, up sharply from £48mn in the identical month final 12 months.

“The price of dwelling, sure, completely that’s driving the necessity to borrow, however I believe the bigger of the 2 points is that individuals have gotten much less choices open to them,” mentioned H&T chief government Chris Gillespie. “The necessity of individuals to borrow has returned . . . however that want has returned right into a market the place the availability of small sum credit score is massively lowered.”

He added that the clear distinction between pawnbroking and most different types of lending was that “our solely recourse is to the asset . . . we don’t and might’t ever return to the borrower if there’s a shortfall [in repayment]”.

Nevertheless, like different types of lending there are dangers related to utilizing pawnbrokers.

“Utilizing a pawnbroker could be a comparatively costly approach to borrow and you’ll normally solely borrow a share of the worth of the merchandise you wish to pawn,” mentioned Caroline Siarkiewicz, chief government of the Cash and Pensions Service, which is sponsored by the UK’s Division for Work and Pensions.

Shoppers can anticipate to pay a pawnbroker a better price of curiosity than they’d for a excessive avenue mortgage — however lower than a payday lender, based on the Cash and Pensions Service.

If a borrower fails to repay the mortgage, possession of the asset passes to the pawnbroker, who may promote it. They must attempt to safe the very best worth for the merchandise, and any surplus generated after the debt is paid should be returned to the shopper.

Ramsdens mentioned pawnbrokers sometimes charged 8-10 per cent a month. Clients have six months to repay their mortgage and greater than 95 per cent pay the complete mortgage again in a single instalment.

Siarkiewicz famous that this technique of borrowing could be tempting “as a result of it’s a fast approach to get entry to money”. However she confused it was necessary clients “store round to search out essentially the most aggressive charges and ensure they’re FCA regulated”. 

Round 130 members of the Nationwide Pawnbrokers Affiliation run 870 retailers across the UK, accounting for 97 per cent of the trade. The biggest manufacturers are H&T, Money Converters and Ramsdens, however most members run only a single retailer.

A lot of these corporations have benefited from the demise of subprime lenders or non-standard finance suppliers, which prospered after the 2008 monetary disaster, as mainstream banks turned reluctant to lend to customers with blemished credit score information.

Ramsdens mentioned it ended its personal payday lending providing when market circumstances shifted.

“It was scary the place the pricing had acquired to, so individuals would borrow £100 and must pay again £140,” mentioned Kenyon.

The Monetary Conduct Authority clamped down on the sector in response to fears about rising ranges of shopper debt. The variety of lively high-cost, short-term lenders within the UK fell by nearly a 3rd between 2016 and the third quarter of 2020, based on FCA figures.

“The FCA have regulated the market nearly to dying,” added Kenyon.

Wonga, as soon as the UK’s largest payday mortgage supplier, filed for administration in 2018 after a surge of buyer complaints. Provident Monetary, one of many largest members in Britain’s subprime market, shut a unit offering “excessive value lending” final 12 months.

Amigo Loans, which presents “guarantor loans” backed up by a borrower’s buddies or household, has additionally been out of the market. The group is awaiting FCA approval to recommence lending for the primary time since November 2020 following a backlog of complaints and uncertainty brought on by the pandemic.

There at the moment are considerations that individuals struggling to entry credit score might flip to purchase now, pay later companies, a kind of short-term lending that enables customers to pay for purchases in instalments.

These companies boomed through the pandemic as on-line procuring surged. Nevertheless, based on polling knowledge from debt charity StepChange, half of these with purchase now, pay later loans within the UK mentioned they discovered it onerous to maintain up with family payments and credit score repayments.

Debt charities have additionally raised considerations concerning the elevated use of pawnbrokers.

“With on a regular basis prices hovering it’s no shock to listen to extra persons are utilizing pawnbrokers,” mentioned Theodora Hadjimichael, chief government of Accountable Finance. “However you shouldn’t have to put your marriage ceremony ring or a household heirloom in danger to pay an surprising expense.”