The Financial Conduct Authority (FCA) has published new data on various trends in the high cost short-term lending sector. The FCA continues to regard payday lending and other forms of short-term credit as one of its priority areas.
After a fall in business volumes in recent years, the FCA reports that lending volumes are once again on the rise, although they remain well below the volumes seen back in 2013.
More than 5.4 million of these loans were granted in the 12 months to June 30 2018, to an estimated 1.7 million different customers. Around 10 million short-term loans are estimated to have been granted in 2013.
There was also an 11% rise in the number of loans granted when the second quarter of 2018 is compared to the first three months of last year.
The market remains concentrated in the hands of a few major players, with the largest 10 lenders accounting for 85% of the total number of loans. Two-thirds of firms active in this market granted fewer than 1,000 loans each in 2018. The number of authorised lenders has fallen by 15% over two years.
Perhaps unsurprisingly, the regulator says that the costs of borrowing have fallen since the introduction of the price cap and have remained steady since its introduction, suggesting that many payday lenders are charging interest at or near the level of the cap. The average payday loan now requires the customer to repay 1.65 times the loan amount – the average loan in the 12 months to June 30 was £250 and the average amount to be repaid was £413. For the year July 1 2017 to June 30 2018, the total value of new loans was just under £1.3 billion and the total amount payable was £2.1 billion.
Payday loan borrowers are more likely to be young adults and are less likely to own their own home. 37% of payday loan borrowers and 29% of short-term instalment borrowers are currently aged between 25 and 34. 37% of high cost loan borrowers are private or council tenants and 26% are living with parents.
These borrowers are also more likely to be in problem debt, and more likely to struggle with financial management. Amongst the general population, 24% of adults say they have a ‘low’ level of confidence when it comes to financial management, but this rises to 41% when we look at holders of short-term instalment loans, and 61% when we look solely at payday loan borrowers. 67% of payday loan borrowers and 49% of short-term instalment customers are over-indebted, a characteristic that describes just 15% of all UK adults.
Payday loan borrowers are most likely to live in the North West of England, where there are 125 active loans per 1,000 adults, while Northern Ireland has the lowest number of loans per head of population (74 per 1,000). The North East of England has 118 loans per 1,000 people. However, average loan values are highest in Greater London, where the average is £284, and the next highest figure is for South East England at £256. In Northern Ireland, the average loan is only £230.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article