Rachel Springall, Finance Expert at Moneyfacts, said:
“The unsecured personal loans market experienced a spate of rate rise activity during Q2 2022, of which the £7,500 tier, with a repayment term of five years, recorded several providers increasing rates, including high street banks. The average rate on the loan tier £7,500 now stands at 5.2%, a rise of 0.8% over the past quarter and stands at its highest point in six years (September 2016 - 5.2%). This tier is also widely used as a representative APR tier by many loan providers, and traditionally lenders would be conscious to keep this competitive. However, during a cost-of-living crisis, the potential risk for borrowers to default is elevated, so lenders have moved to reprice in response. A few lenders that charge less than 3% remain in this space, but whether this is maintained in the weeks to come is uncertain.
“While the average purchase APR on credit cards reached a record high of 26.7% this month, it is worth noting that only two credit card providers increased their purchase interest rates over Q2 2022, so these and a combination of card withdrawals and fee adjustments were the main causes for the rise. Clearly the assumption that base rate rises would impact credit card pricing for new customers is not the case, and in fact, there remains a healthy appetite from card providers for business, particularly on balance transfer offers.
“The biggest trend noted across the credit card market has been a rise in the average length of introductory 0% balance transfer offers. Several providers improved their terms during Q2 2022, seeing the average interest-free introductory balance transfer term rise to 613 days, the highest point since May 2018 (622 days). HSBC, Halifax, M&S Bank, Sainsbury’s Bank, Santander, and Virgin Money all increased 0% offers for balance transfers, a few of which hold a market-leading position. Consumers must be conscious that the longest 0% offer may not be the best for them, particularly as there are lower transfer fee options available on the market.
“Anyone comparing deals, whether that be to consolidate debts with a loan or move their credit card balance to an interest-free deal, would be wise to check their credit score before they apply, such as with Experian. The months ahead are uncertain amid the rise in the cost of living but seeking advice from a debt advice charity is wise should borrowers be struggling or fear they will be unable to keep up with their repayments.”
Rachel Springall, Finance Expert at Moneyfacts, said:
“The unsecured personal loans market experienced a spate of rate rise activity during Q2 2022, of which the £7,500 tier, with a repayment term of five years, recorded several providers increasing rates, including high street banks. The average rate on the loan tier £7,500 now stands at 5.2%, a rise of 0.8% over the past quarter and stands at its highest point in six years (September 2016 - 5.2%). This tier is also widely used as a representative APR tier by many loan providers, and traditionally lenders would be conscious to keep this competitive. However, during a cost-of-living crisis, the potential risk for borrowers to default is elevated, so lenders have moved to reprice in response. A few lenders that charge less than 3% remain in this space, but whether this is maintained in the weeks to come is uncertain.
“While the average purchase APR on credit cards reached a record high of 26.7% this month, it is worth noting that only two credit card providers increased their purchase interest rates over Q2 2022, so these and a combination of card withdrawals and fee adjustments were the main causes for the rise. Clearly the assumption that base rate rises would impact credit card pricing for new customers is not the case, and in fact, there remains a healthy appetite from card providers for business, particularly on balance transfer offers.
“The biggest trend noted across the credit card market has been a rise in the average length of introductory 0% balance transfer offers. Several providers improved their terms during Q2 2022, seeing the average interest-free introductory balance transfer term rise to 613 days, the highest point since May 2018 (622 days). HSBC, Halifax, M&S Bank, Sainsbury’s Bank, Santander, and Virgin Money all increased 0% offers for balance transfers, a few of which hold a market-leading position. Consumers must be conscious that the longest 0% offer may not be the best for them, particularly as there are lower transfer fee options available on the market.
“Anyone comparing deals, whether that be to consolidate debts with a loan or move their credit card balance to an interest-free deal, would be wise to check their credit score before they apply, such as with Experian. The months ahead are uncertain amid the rise in the cost of living but seeking advice from a debt advice charity is wise should borrowers be struggling or fear they will be unable to keep up with their repayments.”
