A huge number of Britons prefer to turn to the shadow market to get a home loan. They take such a risk because of denials from banks. The Financial Times writes about this tendency.

Recently, interest rates on loans in the UK have been rising rapidly, and it has had a sad effect on those who have a mortgage with a floating rate—which is about 2.4 million households. What's more, the pandemic has left some 17 million Britons financially vulnerable—without savings and heavily in debt.

A recent study of 1,859 British adults found that about three million people have taken out so-called “gray loans” in the past three years. This includes Britons with an annual income of GBP 20,000-25,000 who have been turned down by banks.

Note that the average income in Britain is GBP 28,000 a year, and the big local banks approve mortgage loans only to customers with an income of GBP 75,000 a year and above.

What do the authorities plan to do about it?

At the end of June 2023, the House of Commons rejected a House of Lords proposal that required the Financial Conduct Authority (FCA) to pay more attention to improving public access to financial services.

However, as of July 31, 2023, new FCA requirements regarding financial institutions' obligations to consumers will go into effect. This innovation, among other things, will promote cooperation between banks and nonprofit financial institutions. They protect the interests of consumers by serving as intermediaries between customers and banking institutions.

To compare, in the USA, non-profit credit unions serve 60% of the population, while in Great Britain they serve only 5%. By increasing the share of these unions, banks will eventually reach out to UK residents who are still without access to banking products.