More people applying for payday loans than mortgages, study finds

More UK adults have applied for payday loans (18%) than mortgages (10%) in the past six months, new research by Moneyhub has revealed.

The Open Banking software firm said its findings have highlighted the “precarious financial situation faced by many”.

Of the 18% who applied for payday loans, 6% were accepted, with 4% being rejected outright and 8% being offered a different, more suitable product. Moneyhub also found that over a quarter (27%) of respondents reportedly engaged in risky financial behaviour, such as missing credit card payments or defaulting on a personal loan in the last 12 months.

Moneyhub added that its findings have highlighted an “urgent need” for financial services providers to better identify and support vulnerable customers. While some applicants were directed to more appropriate financial products, the numbers indicate that this effort is “not sufficient”, Moneyhub added.

“As more people become reliant on payday loans, it is crucial that providers spot risky financial behaviours and identify potentially vulnerable customers ahead of time,” commented managing director of decisioning at Moneyhub, Suzanne Homewood.

“By moving away from traditional methods of credit checking, we’d likely see an increase in providers recommending better-suited products and services for their customers’ individual situations. This is because they will be able to understand their customer’s true and holistic financial world and identify potential risks.

“Not only will this help businesses ensure they are truly supporting customers and putting their best interests at heart and in line with consumer duty obligations, but prevent consumers from getting themselves into financial trouble through defaults.”