RUTH SUNDERLAND: There has been a crackdown on high-interest moneylenders, but pawnbrokers are already very good – a sign of the times

  • Galloping inflation reveals the precarious situation of many families
  • Millions of Britons have little or no financial resilience
  • Personal finance education is sorely lacking
  • Politicians have added to the confusion by sending very mixed messages

Ever aware of the blight they inflicted on society during the financial crisis, banks are keen to redeem themselves during the post-Covid cost of living crisis by, he whispers, helping people.

The scary state of the economy hasn’t translated into an increase in bad debt among individuals and businesses – yet – but High Street lenders are launching a preemptive strike against potential defaulters. Santander has identified around one million UK customers whose finances may be at risk over the next few months and is contacting them in order to intervene and prevent people from getting into real trouble.

Other banks are engaged in versions of the same. The risk with this type of exercise is that it can, if not done tactfully, come across as intrusive and condescending. The logic, however, is impeccable: prevention is better than cure. Behind the current situation lie several deep-rooted problems. Wealth inequalities are entrenched and risk becoming more so. Millions of Britons have little or no financial resilience. Personal finance education is sorely lacking.

Uncontrollable: Inflation reduces people’s ability to save and can also devastate the deposits they have

Politicians added to the confusion by sending very mixed messages.

Look at Rishi Sunak, the former chancellor. Not too long ago it was Mr Hospitality, who pushed us to ‘eat out to help’. In his current incarnation, he is Mr. Hairshirt, telling voters there is no alternative to painful tax hikes and belt-tightening. Low interest rates, easy credit and a culture of Yolo and Fomo – translation for older readers: you only live once and the fear of missing out – have fostered a culture of credit.

Low savings rates have discouraged savings. Central bankers have fueled the oven by printing more money until recently under the quantitative easing program, which has kept interest rates low and pushed up the prices of assets such as housing.

Much has been made of the accidental savings of over £200billion amassed during the pandemic, but this focuses on already well-to-do households.

According to MoneySupermarket, one in four Britons have no savings. Those who do are hardly in Rockefeller territory, as the average size of a rain pot is around £5,700 per household.

The difficulties will not be limited to low-income families. So-called “overnight wealthy” households – nominally wealthy due to large estates and pensions but with high spending and little cash on hand – will also feel the pressure. The long-term picture is disheartening. Although self-affiliation has encouraged more retirement savings, a third of them are solely dependent on the state when they retire.

Inflation reduces people’s ability to save and can also devastate the deposits they have. The best fixed rate accounts are currently offering less than 3.5%, while the Bank of England expects inflation to peak at 13.3% in October.

Rampant inflation reveals the precarious situation in which many families have been living for some time. This has been clouded by low interest rates and easy credit, but is now becoming clear.

Some will try to get away with it. The pandemic has seen an increase in the number of people in their 50s and 60s taking early retirement. Some will go back to work.

Others may take a second job. This is good news, if not for the individuals concerned, at least for the economy which is suffering from labor shortages. Others will try to find their way out. There has been a crackdown on high interest lenders, but the pawn shops are already very good. Shares of Britain’s largest group, H&T, are up nearly 43% this year. Sign of the times.