Personal borrowing rates reach six-year high
Personal borrowing rates have reached a six-year high for loans worth £10,000 or more, as the cost of borrowing continues to rise.
The latest borrowing statistics from the Bank of England found that in June 2022, the average rate for a £10,000 loan was 4.11 per cent – the highest level since August 2016.
The average rate for a £5,000 personal loan rose to 8.2 per cent in June, up from 8.14 per cent in May.
Fintech lender Freedom Finance warned that ongoing rises to the Bank of England base rate will put more pressure on borrowers in the coming months. This echoes a statement issued by the Financial Conduct Authority (FCA) last week where the regulator urged consumers to seek help as soon as possible if they are struggling as a result of the cost of living crisis.
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“The latest consumer credit data paints a gloomy picture with the cost of borrowing continuing to increase as inflation spikes and the [Bank of England] continues to hike interest rates,” said David Hendry, chief marketing officer at Freedom Finance.
“The FCA’s intervention last week was timely and important – we wholeheartedly support it. Getting into financial difficulty is not something to be embarrassed about, and the sooner people take action the better. There may be immediate steps they can take to relieve financial pressures.
“In addition, with rates expected to continue rising for the foreseeable future, immediate action may allow borrowers to lock in rates on consumer credit products over fixed-terms to limit the impact of increasing rates.”
The Bank of England statistics also showed that average credit card rates jumped to 21.43 per cent in June, and are now approaching levels not seen since 1998 which was the last time that average rates surpassed 21.5 per cent.
The average overdraft rate remained at a record high of 35.24 per cent in June, the same rate as May.
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