Credit Unions lending record sums to borrowers

1st February 2023

Analysis from Freedom Finance has found that Credit Unions are lending record sums to borrowers in the UK as the cost of borrowing continues to rise.

The latest Freedom Finance Credit Monitor revealed that average household quoted rates on credit cards hit 22.46%, their highest levels since 1998, while personal loans posted their highest quarterly increase of all time in Q4 2022.

Amid the cost-of-living squeeze and this rate-rising environment, Credit Unions have grown in popularity and the latest data released by the Bank of England1 reveals that they are now lending record sums to members.

Total borrowing reached £1.92 billion in Q3 2022, which marks an increase of £255 million (15% increase) compared to the same quarter in 2021, and an uptick of £51 million from Q2 2022.

Despite a dip in the total number of Credit Union members in Q3 2022, there are currently 1.94 million members which remains more than 38,000 higher compared to the same period the year before.

Credit Unions are cooperative societies owned by their members joined by a common bond such as living or working in the same area. They offer a range of financial services products including loans which are often available at low rates and to people on lower incomes and so can be a vital financial lifeboat for those who are under-served by the mainstream lending sector.

Emma Steeley, CEO at Freedom Finance, said  “The rising cost of borrowing combined with the withdrawal of short-term credit providers from the market leaves many people wondering where to turn when looking for affordable credit products.”

“Credit Unions play a critical role in plugging this gap but they remain poorly known and understood. We saw from last year’s CSJ report on loan sharks that people who feel locked out of the regulated financial services industry can fall into illegal lending which can rapidly spiral out of control with disastrous and dangerous consequences.
“This is why it is so important that the industry continues to beat the drum for all providers – including Credit Unions – who are able to broaden access to the credit market and help more people benefit from more products which are suitable for their circumstances.”

“Across the lending market, we all need to be working towards offering consumers a wide variety of products from reputable providers. Technological developments like Open Banking and soft searches can be used to ensure that even people with thin credit files can access the credit market, avoid declined applications and shop around to get the best products that they are eligible for