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Rising confidence in credit card and loans market

Rising confidence in credit card and loans market

Category: Credit cards

Updated: 18/03/2016
First Published: 17/03/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Competition in the credit card and personal loans market has been incredibly intense in recent years, and our latest research shows just how much of an impact this level of activity is having: the average balance transfer term is rising and many loan rates are continuing to fall, which all points to growing confidence in the market – and means that it's a great time to be a borrower!

Growing confidence in cards…

The figures show that the average introductory 0% balance transfer term has risen once again, increasing by 20 days over the last three months to a new record of 608 days (up from 588 days in December 2015). This in itself is just the average, and therefore on the conservative side, with it actually being possible to secure 40 months of interest-free balance transfers!

The latest increase in average term continues the trend seen since we started recording this data, with the average having generally risen for the past 10 years as providers continually try to leap-frog each other to make it to the top spot in the balance transfer charts. Not only that, but the number of cards offering introductory balance transfer terms has also risen (up by five to 128), mirroring the increase in the number of cards offering an introductory purchase term (also up by five to 105), further showing the desire to compete.

However, a particularly notable finding has been the increase in cards offering cashback and reward schemes. This sector appears to have rebounded after a volatile 12 months, which saw the number of reward cards drop considerably as providers adjusted to the new rules facing the sector. Happily, it looks as though things are returning to form, with the number of cards offering a reward scheme ending the quarter at 81 (up from 76 in December and four products higher than in April 2015), with this increase primarily driven by the number of cards offering cashback.

… and personal loans

Activity has been just as considerable in the personal loans market: the majority of average rates have fallen since December to result in most standing at record lows, with the most significant reductions being for larger loan amounts.

Only loans for small borrowing amounts saw rate increases, with the average for loans of £1,000, £2,000 and £3,000 all remaining slightly higher than those first seen in 2006; conversely, rates for higher borrowing amounts are the lowest ever recorded, which means those seeking a higher-tier loan are picking a great time to go about it. Why not check out our loan calculator to see how low your repayments could be?

However, not only have most average rates fallen, but the number of loan providers has risen – up by two quarter-on-quarter to stand at 37, the highest number of providers seen since May 2009 – which provides further indication of a growing desire to compete, with even more providers vying for business. This could potentially result in even lower personal loan rates in the future, particularly if these new providers become embroiled in even more intense competition.

Desire to compete

This all bodes well for potential borrowers, and together with the revival of competition elsewhere in the market (last quarter, our data showed that competition appeared to have stalled slightly, but these latest figures show a welcome return to form), suggests that confidence has returned to the market: providers are displaying a clear desire to attract new customers, and hopefully, this desire to compete will translate into even better deals.

What next?

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