Top Loans News

Derin Clark

Derin Clark

Online Reporter
Published: 24/03/2020

Consumers looking to take out a small loan to help them cope with unexpected financial costs during these uncertain times will find that average loan rates on modest sums have increased year-on-year.

Data in the latest Moneyfacts UK Credit Card Trends Treasury Report shows that the average loan rate on sums of £5,000 to be repaid over three years has risen by 0.3% year-on-year, from 6.8% in March 2019 to 7.1% in March 2020.

In addition to this, at a time when many consumers are worried about their finances, it could be better off for borrowers to hunt around and consider a less familiar name when choosing a loan, as the data from the report found that high street providers on average charge 1.1% more for a loan of £5,000. High street providers offering loans of £5,000 over three years charge an average of 7.8%, while other providers charge an average of 6.7% on the same sum and repayment term.

Unsecured personal loan market analysis 

Average loan rates March 2019 December 2019 March 2020
All lenders £5,000 over three years 6.8% 7.0% 7.1%
High street providers £5,000 over three years  8.2% 7.6% 7.8%
Other providers £5,000 over three years 5.9% 6.6% 6.7%

Source: Moneyfacts Treasury Reports 

Commenting on the increase in unsecured personal loan rates, Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “Considering the current economic conditions, it is important that prospective borrowers keep a close eye on the market, as unsecured personal loans are priced based on risk. As we saw during the financial crisis in 2008, loan rates can increase quickly when there is a spike in risk. These loans are not tied to someone’s home, like a mortgage would be, so lenders would have no security should a consumer default.

“It may take a few months for the market to adjust to any external influences, but consumers can still find competitive rates – although they are starting to rise. If borrowers are keen to apply, speed is crucial. As with any debt, it is vital that consumers ensure they are able to keep up with repayments regardless of any changes to circumstances.”

TSB has reduced the interest rate on its unsecured personal loan and is now offering borrowers 2.9% APR on loans between £7,500 to £25,000.

The high street bank previously charged 3.2% APR and its rate reduction sees it offering one of the most competitive rates in the personal loans chart. The new rate is available to both existing and new customers and can be applied for online, in branch or by phone. It includes a number of features such as payment flexibility and payment holidays. Borrowers looking for a loan between £20,001 and £25,000 over terms of 61 months to seven years should be aware that TSB charges a higher APR.

Commenting on the rate reduction, Graham Dodds, head of loans at TSB, said: "At this time of year, many people will be re-organising their finances, thinking of buying a new car, planning their summer holiday or simply consolidating their outstanding debts. Whatever the reason, the new TSB market-leading rate of 2.9% could be the perfect solution as it also allows customers the flexibility to make overpayments and the opportunity to take payment holidays should they need to do so.”

Second charge mortgage new business volumes increased during November 2019, data released by the Finance & Leasing Association (FLA) today reveals.

According to the data, there was a 14% year-on-year increase during November in the number of second charge mortgages, a total of 2,594 new agreements during the month. In addition to this, the average value of second charge mortgages also increased, by 3% year-on-year, during November. Commenting on the data, Fiona Hoyle, head of consumer and mortgage finance at the FLA, said: “The second charge mortgage market reported a fifteenth consecutive month of double-digit new business volumes growth in November. The average value of second charge mortgages in November grew by 3% compared with the same month in 2018 to £44,530.”

With many bank balances depleted and credit cards creaking after the festive period, some consumers may be considering how to get their finances back in shape for 2020. A new loan might be the answer to consolidating expensive existing debt or simply a way to fund their plans for 2020. We’ve looked at the sector and found the best deals currently out there for a range of loan types.

Christmas can be a financially stressful time of year, so consumers looking to consolidate their debts during the festive period or into the new year will be pleased that the average personal loan rate has fallen.

Research due to be published in the Moneyfacts UK Credit Card Trends Treasury Report reveals that the average rate in the £5,000 over three years tier has fallen by 0.2% since November to stand at 7.0% today, while the £10,000 over five years loan tier decreased by 0.2%, offering 4.5% today. As well as this, the average rate at the loan tier of £7,500 over five years has also fallen, albeit by a more modest 0.1% over the month to stand at 4.6% today. 

Commenting on the fall in loan rates, Rachel Springall, finance expert at Moneyfacts, said: “It’s encouraging to see that the unsecured personal loans market is still buoyant, with rates falling over the past quarter. This improvement to the loans market could be encouraging for borrowers considering consolidating their debts either now or in the new year.”

Unsecured personal loan market analysis 

Average loan rates (by tier) Dec 2017 Dec 2018 Nov 2019 Dec 2019
£5,000 over three years 7.2% 6.8% 7.2% 7.0%
£7,500 over five years 4.7% 4.8% 4.7% 4.6%
£10,000 over five years 4.6% 4.7% 4.7% 4.5%

Source: Moneyfacts Treasury Reports

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