Personal loan rates soar to nine-year high
Consumer loan rates have soared to their highest level since 2013, new research has found.
Analysis of recent Bank of England data by lending marketplace Freedom Finance found that the average quoted rate on a £5,000 personal loan rose by 0.64 per cent to 10.02 per cent at the end of November.
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This follows a 0.98 per cent increase the previous month and takes average rates for loans of this size into double digits for the first time since December 2013.
£10,000 personal loan rates increased by 0.73 per cent in November, following a 0.86 per cent rise last month, to reach 5.95 per cent – the highest level since October 2013.
Meanwhile, credit card rates grew by 0.2 percentage points to 22.03 per cent, equating to their highest average rate since 1998.
Read more: Rising number of SMEs using personal loans to prop up business
Interest rates on loans have soared this year, as the central bank has tightened monetary policy to tame inflation.
The central bank increased the base rate to three per cent at its November meeting, marking the eighth consecutive hike since December 2021, which pushed the rate to its highest level for 14 years.
“As we head into a winter dominated by fears over energy bills, blackouts and surging inflation, the latest figures on the cost of borrowing will only add to the headaches many households are nursing,” said Emma Steeley, chief executive at Freedom Finance.
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“Loans, credit cards and overdrafts are all becoming more expensive and so people need to be taking extra steps to ensure that they are getting the best products for their financial situation and at the best possible rates.
“This means shopping around between different providers and using marketplaces that, through a single application, will only show borrowers the products that they are eligible for to increase their confidence and avoid harming their credit score with a declined application.
“Just because the cost of borrowing is rising doesn’t mean consumers should be paying above-average rates on their credit products. Following simple best practice actions can help people secure a product that suits their circumstances, supports their financial situation and is delivered at the best rate available to them.”