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

Rachel Springall

Finance Expert & Press Officer
Published: 27/06/2022

The average rate on a £7,500 loan stands at 5.2%, the highest it has been in six years when it matched this figure.

Traditionally, this tier has been of value for many loan providers who widely use it as a representative Annual Percentage Rate (APR). This is why it has been a hotspot for competition.

Add a cost-of-living crisis to the mix, 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.

Meanwhile, 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.

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Santander launches travel cashback incentive on its credit cards

Two of the cards eligible for this offer come with a non-sterling transaction fee of 2.95%.

Santander has launched a 1% cashback incentive on its Mastercard credit cards for spending abroad between 13 June and 18 September. To qualify, customers must spend at least £500 in foreign currency during their holiday.

“For many of us, this is our first summer holiday abroad for two years, and to celebrate we’re giving our Mastercard credit card customers cashback on their holiday spending,” said Matt Hall, Head of Cards and Loans at Santander UK.

However, those looking to make use of the provider’s Everyday credit cards to access this incentive can expect a non-sterling transaction fee of 2.95% on their purchases. The other cards on offer, which include the All in One Credit Card and World Elite Mastercard, do not hold any additional fees.

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More than a fifth of Brits planning Jubilee holiday, says Barclaycard

Travel agent and airline spending are at their highest since the beginning of the COVID-19 pandemic.

Just over one in five Brits are planning on taking a holiday during the upcoming Queen’s Jubilee weekend, according to Barclaycard’s latest Consumer Spending Index. Of this number, 84% of respondents are planning a trip abroad.

“While concerns around rising household bills may continue to hamper spending on non-essential items, the upcoming Platinum Jubilee Weekend and summer months should provide opportunities for Brits to spend on celebrations and make the most of warmer weather,” said José Carvalho, Head of Consumer Products at Barclaycard.

In addition, travel agent and airline spending saw their biggest monthly expenditure since the onset of the COVID-19 pandemic in 2020.

Despite this increase, compared to April of 2019, travel agent spending in the same month this year was down 3.5%, while airline spending was down 9.9%.

“The improvements seen by airlines and travel agents are particularly positive, and hopefully point to a recovery in spending on international travel later this year,” said Carvalho.

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Klarna to report customer debts and payments to credit agencies

The UK’s biggest Buy Now Pay Later provider will share its customer debt and payments with Experian and TransUnion from 1 June.  

From 1 June, Buy Now Pay Later (BNPL) provider Klarna will start sharing its customers payments made on time, late payments, and unpaid purchases with credit reference agencies.

Experian and TransUnion will be the first credit reporting agencies to receive this information.

This means that if a consumer falls behind on any repayments, their credit score will worsen. Equally, if a consumer repays their debts on time their credit rating will improve.

“It is alarming that UK consumers are still being forced to take out high cost credit cards to demonstrate they can use credit responsibly and build their credit profile,” said Alex Marsh, Head of Klarna UK.

“That will start to change on 1 June this year as the vast majority of the 16 million UK consumers who make Klarna BNPL payments in full and on time will be able to demonstrate their responsible use of credit to other lenders.” 

The move comes at a time when the BNPL market is facing pressure from lobbyists to be regulated. In February, Klarna, Clearpay, Openpay and Laybuy all changed terms in their contracts after pressure from the Financial Conduct Authority (FCA).

Currently, if a customer falls behind on their Klarna repayments, their credit score will remain unaffected. Instead, they will be referred to a debt collection agency.

This is common with other BNPL providers. Yet around 47% of people surveyed by Creditspring, a loan subscription provider, did not know that a BNPL user could be referred to a debt collector if they missed their payment. 

"Worst-case scenario is that borrowers can end up receiving a knock on the door from a debt collector, but currently the vast majority are completely unaware this is even a possibility," said Neil Kadagathur, Co-Founder and CEO of Creditspring. 

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One in three adults may battle to access credit from mainstream lenders

Number of people struggling to access credit increased by 50% in six years.

There are 20.2 million UK adults who may have difficulty accessing credit from mainstream lenders according to fintech company TotallyMoney and accounting firm PWC.

This is likely due to minor adverse credit history, volatile incomes which can impact affordability assessments, or minimal credit history. People who fall into this category are often referred to as “under-served.”

“The findings show the underbelly of a broken market – and it’s too big a problem to ignore,” said Alastair Douglas, CEO of TotallyMoney.

The category of “under-served” borrowers has grown by 50% over the last six years. In addition, a further 8.9 million are “financially fragile”, and are at risk of adding to the number.  

“An alarming rise in the under-served group, and millions more treading water, is not just a symptom of the pandemic and the worst cost of living crisis in a generation, it’s also because the credit market is archaic; built to keep data in the hands of companies, not the people it belongs to,” said Douglas.

It is a view shared by Simon Westcott, Strategy & UK Financial Services Lead at PwC UK, who also calls for the financial services industry to offer greater support.

“There is an opportunity for lenders to enhance existing propositions and deliver new solutions that truly meet the needs of this big and diverse segment of society,” he said.

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Recent News

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UK restaurants enjoy resurgent Easter weekend spending spree

21st April 2022

Spending at UK restaurants this Easter weekend were up 116.2% compared to last year, according to data from Barclaycard Payments. Much of this can be owed to the ease of lockdown regulations, which only permitted outdoor seating at restaurants last year. “Many experience–led businesses alongside food and drink retailers received a significant boost in trade, which will no doubt be welcome news against the wider backdrop of concerns around the cost of living,” said Harshna Cayley, Head of Online Payments at Barclaycard Payments.

Spending at UK restaurants this Easter weekend were up 116.2% compared to last year, according to data from Barclaycard Payments.

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Increased fuel prices drive further consumer spending

12th April 2022

Spending on essential items increased 18.1% since March 2019. UK consumer card spending on essential items, such as fuel and food, increased 18.1% since March 2019, one year before the first lockdown measures were introduced in the UK.

Spending on essential items increased 18.1% since March 2019.

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Should I use a loan to fund my holiday break?

9th April 2022

With the long Easter weekend fast approaching, and summer on the horizon, many of you are probably thinking of taking a city break. However, with the cost of living showing no signs of slowing down, financing this holiday could become complex for some families. This is why some are considering a personal loan, or “holiday loan”, to help finance their getaway trip. Below we have discussed what you should know if you are considering a holiday loan.

Matt Tristram, of Loans Warehouse, spoke to Moneyfacts about the advantages of using a “holiday loan” to finance your getaway.

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Spring clean finances as the cost of living soars (part two)

31st March 2022

The cost of living is soaring, and consumers may want to try to save some cash in any way they can by making simple changes to their everyday finances. Even if the months ahead seem daunting, whether a spender or a saver, taking some time out to spring clean finances and being conscious of a budget could be invaluable.

The cost of living is soaring, and consumers may want to try to save some cash in any way they can by making simple changes to their everyday finances.

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Most Popular Credit Card News

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

27th June 2022

The average rate on a £7,500 loan stands at 5.2%, the highest it has been in six years when it matched this figure. Meanwhile, the biggest trend noted across the credit card market has been a rise in the average length of introductory 0% balance transfer offers.

The average rate on a £7,500 loan stands at 5.2%, the highest it has been in six years when it matched this figure.

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Zopa launches first ever credit card – how does it compare to others on the market?

28th October 2020

Zopa has launched its first credit card, which comes with a range of features that the bank has said are designed to help customers to stay in control of their money and debt

Zopa has launched its first credit card, which comes with a range of features that the bank has said are designed to help customers to stay in control of their money and debt

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Santander launches travel cashback incentive on its credit cards

13th June 2022

Santander has launched a 1% cashback incentive on its Mastercard credit cards for spending abroad between 13 June and 18 September. To qualify, customers must spend at least £500 in foreign currency during their holiday. “For many of us, this is our first summer holiday abroad for two years, and to celebrate we’re giving our Mastercard credit card customers cashback on their holiday spending,” said Matt Hall, Head of Cards and Loans at Santander UK.

Santander has launched a 1% cashback incentive on its Mastercard credit cards for spending abroad between 13 June and 18 September.

Read More
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Should I use a loan to fund my holiday break?

9th April 2022

With the long Easter weekend fast approaching, and summer on the horizon, many of you are probably thinking of taking a city break. However, with the cost of living showing no signs of slowing down, financing this holiday could become complex for some families. This is why some are considering a personal loan, or “holiday loan”, to help finance their getaway trip. Below we have discussed what you should know if you are considering a holiday loan.

Matt Tristram, of Loans Warehouse, spoke to Moneyfacts about the advantages of using a “holiday loan” to finance your getaway.

Read More

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