Peer2Peer Finance News
The UK's first peer-to-peer finance magazine for investors and the industry
  • Home
  • News
    • Personal Finance News
    • Industry News
    • SME News
    • Global News
  • Property
  • IFISA
    • IFISA Guide
  • Video
  • Open Banking
  • Cryptocurrency
  • Features
    • Joint Ventures and Promoted Content
  • Comment & Analysis
  • What is P2P?
  • Partners
  • Events
    • Past Events
  • P2P Power 50
    • Power 50 2020
    • Power 50 2019
    • Power 50 2018
    • Power 50 2017
  • Sign up to our e-newsletters
  • Magazine
  • Directory
  • Jobs
  • My Account
    • Manage Account
    • Change Password
    • Log In
    • Log Out
shutterstock_1150813274
August 29 2018

Personal loan price war continues despite rate rise

Hannah Smith News, Personal Finance News balance transfer, Bank of England, base rate, consumer credit, credit cards, Moneyfacts, Personal loans

CONSUMERS may be poised for the cost of borrowing to rise since the Bank of England raised interest rates earlier this month, but so far personal loan rates remain “in freefall”, according to new research.

Analysis from personal finance website Moneyfacts has found that the cost of an unsecured personal loan has plunged in the last five years, a period in which there was only one base rate cut and two more recent rises.

Read more: Base rate rise won’t ease saver woes, say P2P firms

It noted lenders have been slashing the cost of their personal loans in a bid to overthrow the market leaders. This has resulted in the average interest rate on a £5,000 unsecured loan falling from 10.7 per cent to 6.8 per cent since 2013, saving consumers about £300 over three years.  Other loan tiers have also seen rates fall over the last five years (see table below).

Average loan rates

Read more: Banks yet to pass on the full interest rate rise, but how does P2P compare?

A borrower shifting £5,000 of debt from a typical 18.9 per cent APR credit card to a 3.3 per cent APR loan, the cheapest currently available, could save £1,195 in interest over three years, Moneyfacts calculated.

However, it noted that people looking to borrow smaller sums would probably be better served by using a 0 per cent balance transfer credit card and paying it off within the interest free period. Providers are extending the length of these deals, with consumers now getting an extra five months to repay interest free, compared to this time last year, based on the longest deal without an annual card fee.

Rachel Springall, finance expert at Moneyfacts, said it is encouraging to see that the personal loan market has been left unscathed by changes in the base rate, but it may not last forever.

“Lenders are advertising headline-grabbing loan rates but these typically focus on loans of £7,500 or more, so borrowers need to keep this in mind when they are shopping around for a smaller loan,” she said. “It’s also important to remember that advertised rates only have to be given to 51 per cent of successful applicants, so not every customer is guaranteed the best rate.

“There is no telling how long lenders can sustain the current rates either, with economic challenges in the market that could impact the providers offering these cheap deals.”

Assetz Capital hires new chief risk officer LandlordInvest to allow loan extensions

Related Posts

magnifier

Industry News, News, Top 3

Trade association calls for more FCA scrutiny

FOLK2FOLK - Roy Warren MD - head crop (col)

Industry News, News, Top 3

Folk2Folk eyes £100m from institutions as it expands nationally

the acronym fca for Financial Conduct Authority concept represented by wooden letter tiles

Industry News, News, Top 3

FCA to publish initial supervisory work on consumer credit guidance

Popular posts:

  • Chancellor unveils recovery loan scheme
  • Budget outlines plans for £15bn of green bonds in 2021
  • FCA warns The House Crowd investors against using…
  • Government to launch replacement future fund scheme
  • BBB sets out further details on recovery loan scheme
  • Cyan Finance launches IFISA to help investors go green
Back To Top
  • Home
  • Contact
  • About
  • Team
  • Advertising
  • Subscribe
  • Privacy
  • T&Cs
  • Disclaimer

Follow Us on Social Media

© Peer2Peer Finance News 2020
• Additional design by