Balance transfer offers cut and rates hit new highs

Rachel Springall, Press Officer / Finance Expert T: 01603 476210 E: Email Rachel

Balance transfer offers cut and rates hit new highs

The latest Moneyfacts UK Unsecured Lending Trends Treasury Report, which studies the UK personal finance market (Credit Cards, Personal Loans and Overdrafts), reveals the average interest-free balance transfer term fell during Q4 2022 and the average purchase APR reached a record high, while on loans, average rates increased.

Between the start of September and the start of December 2022 (Q4 2022), the average purchase APR (which includes card fees) rose to an all-time high of 30.3% APR, according to our records, which go back to June 2006. The average purchase PA rate rose to 24.603%, a record high. A combination of interest rate rises, withdrawals of low rate cards, and new cards launched, all contributed to this rise.
The average interest-free balance transfer term on credit cards fell to 577 days, from 612 days in September, the lowest since December 2021 (577). There are more options for borrowers to choose from than a year ago, up from 68 offers to 72.
The average interest-free purchase term on credit cards fell to 266 days, from 295 days in September, and terms are down year-on-year. There are more options for borrowers to choose from than a year ago, up from 62 offers to 67.
Balance transfer fees have risen to 2.16% on average, up from 1.96% a year ago, now the highest recorded since March 2021 when it was 2.23%.
Average unsecured personal loan rates for £5,000 over three years, £7,500 over five years and £10,000 over five years are up compared to the beginning of September 2022. Both the average rates on the £7,500 and £10,000 loan tier now stand at their highest point in 10 years (December 2012 – both 7.6%).

Between the start of September and the start of December 2022 (Q4 2022), the average purchase APR (which includes card fees) rose to an all-time high of 30.3% APR, according to our records, which go back to June 2006. The average purchase PA rate rose to 24.603%, a record high. A combination of interest rate rises, withdrawals of low rate cards, and new cards launched, all contributed to this rise.
The average interest-free balance transfer term on credit cards fell to 577 days, from 612 days in September, the lowest since December 2021 (577). There are more options for borrowers to choose from than a year ago, up from 68 offers to 72.
The average interest-free purchase term on credit cards fell to 266 days, from 295 days in September, and terms are down year-on-year. There are more options for borrowers to choose from than a year ago, up from 62 offers to 67.
Balance transfer fees have risen to 2.16% on average, up from 1.96% a year ago, now the highest recorded since March 2021 when it was 2.23%.
Average unsecured personal loan rates for £5,000 over three years, £7,500 over five years and £10,000 over five years are up compared to the beginning of September 2022. Both the average rates on the £7,500 and £10,000 loan tier now stand at their highest point in 10 years (December 2012 – both 7.6%).

Credit card market analysis
	Dec-20	Dec-21	Sep-22	Nov-22	Dec-22
Average purchase APR (includes fee)	25.1%	26.2%	29.6%	29.8%	30.3%
Average purchase rate per annum	22.695%	23.621%	23.967%	24.122%	24.603%
Average interest-free purchase term (days)	278	303	295	276	266
Number of introductory interest-free purchase deals	56	62	65	67	67
Average interest-free balance transfer term (days)	520	577	612	589	577
Number of introductory interest-free balance transfer deals	60	68	73	73	72
Average balance transfer fee	2.22%	1.96%	1.99%	2.12%	2.16%
Data based on the start of the month.
Source: Moneyfacts Treasury Reports

Loan market analysis
Unsecured personal loan average rate (APR)	Dec-20	Dec-21	Sep-22	Nov-22	Dec-22
£3,000 over three years	15.0%	14.3%	14.5%	15.4%	15.9%
£5,000 over three years	7.2%	6.9%	7.7%	8.9%	9.5%
£7,500 over five years	4.6%	4.4%	5.6%	6.8%	7.4%
£10,000 over five years	4.5%	4.4%	5.5%	6.8%	7.3%
Average interest rates based as at the start of the month.
Source: Moneyfacts Treasury Reports

Credit card market analysis
	Dec-20	Dec-21	Sep-22	Nov-22	Dec-22
Average purchase APR (includes fee)	25.1%	26.2%	29.6%	29.8%	30.3%
Average purchase rate per annum	22.695%	23.621%	23.967%	24.122%	24.603%
Average interest-free purchase term (days)	278	303	295	276	266
Number of introductory interest-free purchase deals	56	62	65	67	67
Average interest-free balance transfer term (days)	520	577	612	589	577
Number of introductory interest-free balance transfer deals	60	68	73	73	72
Average balance transfer fee	2.22%	1.96%	1.99%	2.12%	2.16%
Data based on the start of the month.
Source: Moneyfacts Treasury Reports

Loan market analysis
Unsecured personal loan average rate (APR)	Dec-20	Dec-21	Sep-22	Nov-22	Dec-22
£3,000 over three years	15.0%	14.3%	14.5%	15.4%	15.9%
£5,000 over three years	7.2%	6.9%	7.7%	8.9%	9.5%
£7,500 over five years	4.6%	4.4%	5.6%	6.8%	7.4%
£10,000 over five years	4.5%	4.4%	5.5%	6.8%	7.3%
Average interest rates based as at the start of the month.
Source: Moneyfacts Treasury Reports

Rachel Springall, Finance Expert at Moneyfacts, said:

“The cost to borrow on credit cards has reached a record high, with both the average purchase APR (which includes card fees) and the average purchase per annum rate increasing during Q4 2022. Borrowers may be concerned to see the average purchase APR surpass 30%, but it’s worth noting there remains a plentiful number of 0% introductory credit cards on the market. However, over the past few months, the interest-free terms on offer both for purchases and balance transfers have waned, so borrowers now have less time to pay off their debts before interest is charged.

“Those borrowers looking to take out a 0% introductory balance transfer card will be disappointed that the cost to move their debts is rising, with the average balance transfer fee increasing during Q4 2022 to 2.16%, the highest recorded since March 2021 when it was 2.23%. The average introductory interest-free balance transfer term of 577 days is at its lowest since December 2021, so despite these offers being typically sought after at this time of year, credit card providers have tightened the terms they are prepared to offer. Shoppers looking to spread the cost of their purchases now and leading into the New Year will also find terms on 0% introductory purchase offers have worsened during Q4 2022, so they have around one month less to pay back their debt before interest applies compared to September 2022.

“Borrowers looking to consolidate their debts will find the interest rates charged on unsecured personal loans rose during Q4 2022, with both the average rate on a £7,500 and £10,000 loan tier (7.4% and 7.3% respectively) hitting a 10-year high (December 2012 – both 7.6%). Lenders typically increase rates on loans when the potential risk for borrowers to default is elevated, so it’s not too surprising to see rates rise amid a cost of living crisis. As the start of 2023 draws closer, it will be interesting to see how loan and credit card providers adjust their offerings to entice new business at a time when uncertainties surrounding borrowers’ ability to pay off their debts remains.”

Rachel Springall, Finance Expert at Moneyfacts, said:

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Notes to editors

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Notes to editors

Pioneering financial comparison technology for over 35 years.

Our expert research team monitors the thousands of mortgages, savings, credit card, personal loan, business banking, life, pension and investment products in the UK.

Moneyfacts is the UK's leading independent provider of finance product data. For over 35 years Moneyfacts' information has been a key driver behind personal finance product decisions.

For more information about us please see our key facts.

Broadcast

Our broadcast suite enables our finance experts to appear in-vision for television, and we regularly comment live on national and regional radio.

To arrange an interview for radio or television, please contact our press department. We have an in-house broadcast room.

If you're looking for extra comment, a chart or more information, then please give us a call. We are always more than happy to help.

Rachel Springall Press Officer / Finance Expert

T: 01603 476210

E: Email Rachel

Caitlyn Eastell Apprentice Press & PR Assistant

T: 01603 476169

E: Email Caitlyn