Cost of credit cards and personal loans continues to rise
Average rates on all major forms of unsecured household borrowing are continuing to rise, according to the latest Bank of England figures.
Digital lending marketplace Freedom Finance has analysed the figures to find that consumer credit rose again in September, continuing an upward trend in the cost of borrowing that has persisted all year.
Household budgets are already facing a severe squeeze as inflationary pressures and the spike in energy bills take hold, while rising mortgage rates could see many homeowners come under mounting pressure.
Freedom Finance found that average credit card rates jumped a further 0.08 percentage points in September to hit 21.88 per cent – the highest average monthly rate since December 1998 (22.19 per cent).
Read more: Credit Unions see surge in consumer borrowers
The average quoted rate for a £10,000 personal loan rose for a seventh successive month, increasing by a further 0.09 percentage points to 4.43 per cent at the end of September. It is now at a seven-year high and at a level not surpassed since December 2015 (4.45 per cent).
The average rate for a £5,000 personal loan ticked up to 8.39 per cent in September and is at its highest level since March 2017 (9.54 per cent).
Overdraft rates are also at an all-time high, nudging up 0.01 percentage points to 35.30 per cent in September; rates spiked in April 2020 when new regulations were introduced but they have been consistently rising to new highs even since then.
Read more: New consumer lending grew by 14pc in August
“Consumers cannot control the upward trajectory of the cost of consumer credit, but they must ensure they are taking all the measures available to them to get the best and most appropriate products for their circumstances”, Emma Steeley, chief executive at Freedom Finance, said.
“Digital marketplaces are a great way to shop around as they automate the process through just a single application and, as they use soft-search technology, consumers will only be offered loans or credit cards that they are definitely eligible for.
“The lending industry can play a positive role in helping people manage their money through this difficult period, using its data assets to provide the most appropriate offering to customers.”
Read more: Freedom Finance appoints Emma Steeley as chief executive