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Loan rates rise to six year high, but 0% cards improve

Image of a Moneyfacts Unsecured Lending Treasury Report Image of a Moneyfacts Unsecured Lending Treasury Report Image of a Moneyfacts Unsecured Lending Treasury Report
Rachel Springall, Press Officer
Rachel Springall, Press Officer / Finance Expert T: 01603 476210 E: Email Rachel
27/06/2022

Loan rates rise to six year high, but 0% cards improve

Loan rates rise to six year high, but 0% cards improve

Moneyfacts UK Unsecured Lending Trends Treasury Report, which studies the UK personal finance market (Credit Cards, Personal Loans and Overdrafts), reveals rate increases to several loan rate tiers during Q2 2022, whilst on credit cards, 0% balance transfer offers improved.

 

Moneyfacts UK Unsecured Lending Trends Treasury Report, which studies the UK personal finance market (Credit Cards, Personal Loans and Overdrafts), reveals rate increases to several loan rate tiers during Q2 2022, whilst on credit cards, 0% balance transfer offers improved.

 

  • 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 March 2022. The average rate on the loan tier £7,500 stands at its highest point in six years (September 2016 - 5.2%).
  • The average interest-free balance transfer term on credit cards rose to 613 days, from 602 days in March. Terms are up year-on-year from 550 days and are currently the longest seen since May 2018, when the average was 622 days.
  • Between the start of March and the start of June 2022 (Q2 2022), the average purchase APR (which includes card fees) rose to an all-time high of 26.7% APR, according to our records, which go back to June 2006. A combination of card withdrawals, interest rate rises, fee rises, and the size of fees on new cards launched all contributed to this rise.
  • 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 March 2022. The average rate on the loan tier £7,500 stands at its highest point in six years (September 2016 - 5.2%).
  • The average interest-free balance transfer term on credit cards rose to 613 days, from 602 days in March. Terms are up year-on-year from 550 days and are currently the longest seen since May 2018, when the average was 622 days.
  • Between the start of March and the start of June 2022 (Q2 2022), the average purchase APR (which includes card fees) rose to an all-time high of 26.7% APR, according to our records, which go back to June 2006. A combination of card withdrawals, interest rate rises, fee rises, and the size of fees on new cards launched all contributed to this rise.

Credit card market analysis

 

Jun-20

Jun-21

Mar-22

May-22

Jun-22

Average purchase APR (includes fee)

25.5%

25.4%

26.3%

26.6%

26.7%

Average purchase rate per annum

23.113%

22.849%

23.733%

23.799%

23.834%

Average interest-free purchase term (days)

282

285

307

306

307

Number of introductory interest-free purchase deals

55

56

62

63

62

Average interest-free balance transfer term (days)

555

550

602

610

613

Number of introductory interest-free balance transfer deals

56

59

69

69

68

Average balance transfer fee

2.55%

2.12%

1.95%

1.96%

1.95%

Data based on the start of the month.

Source: Moneyfacts Treasury Reports

 

Loan market analysis

Unsecured personal loan average rate (APR)

Jun-20

Jun-21

Mar-22

May-22

Jun-22

£3,000 over three years

14.8%

14.4%

14.3%

14.1%

14.3%

£5,000 over three years

7.4%

7.1%

7.0%

7.1%

7.4%

£7,500 over five years

4.5%

4.4%

4.4%

4.6%

5.2%

£10,000 over five years

4.5%

4.4%

4.4%

4.6%

5.2%

Average interest rates based as at the start of the month.

Source: Moneyfacts Treasury Reports

Credit card market analysis

 

Jun-20

Jun-21

Mar-22

May-22

Jun-22

Average purchase APR (includes fee)

25.5%

25.4%

26.3%

26.6%

26.7%

Average purchase rate per annum

23.113%

22.849%

23.733%

23.799%

23.834%

Average interest-free purchase term (days)

282

285

307

306

307

Number of introductory interest-free purchase deals

55

56

62

63

62

Average interest-free balance transfer term (days)

555

550

602

610

613

Number of introductory interest-free balance transfer deals

56

59

69

69

68

Average balance transfer fee

2.55%

2.12%

1.95%

1.96%

1.95%

Data based on the start of the month.

Source: Moneyfacts Treasury Reports

 

Loan market analysis

Unsecured personal loan average rate (APR)

Jun-20

Jun-21

Mar-22

May-22

Jun-22

£3,000 over three years

14.8%

14.4%

14.3%

14.1%

14.3%

£5,000 over three years

7.4%

7.1%

7.0%

7.1%

7.4%

£7,500 over five years

4.5%

4.4%

4.4%

4.6%

5.2%

£10,000 over five years

4.5%

4.4%

4.4%

4.6%

5.2%

Average interest rates based as at the start of the month.

Source: Moneyfacts Treasury Reports

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.”

Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

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 30 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.

 

Notes to editors

Pioneering financial comparison technology for over 30 years.

Moneyfacts Group plc is the UK’s leading provider of retail financial product data. Used by virtually every bank and building society in the UK, and supplied to the Bank of England, Financial Conduct Authority, Financial Ombudsman Service, HM Treasury, Prudential Regulatory Authority and UK Finance.

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 30 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.

 

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Rachel Springall Press Officer / Finance Expert
Eleanor Williams Press Officer / Finance Expert