Competition returns to loans, but stalls in cards - Loans - News |

News News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

Competition returns to loans, but stalls in cards

Competition returns to loans, but stalls in cards

Category: Loans

Updated: 26/09/2016
First Published: 26/09/2016

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 It is now over 6 months old so the content may be out of date.

Our recent figures reveal a mixed picture in terms of unsecured lending, as while competition appears to have returned to the loans market, it's notably slowed in the credit card sector.

Falling rates…

The figures, taken from the latest Moneyfacts Treasury Report, show a clear rise in loans competition during the last three months, with all loan tiers seeing rates fall. This marks a definite turnaround from the pattern noted in the previous quarter, when average rates either rose or remained static.

The largest reductions were recorded in the higher loan tiers, offering those seeking a significant personal loan an even better deal: both the £20,000 and £25,000 tiers fell by 0.3% from June to stand at 5.7% APR, while the £15,000 and £7,500 tiers both fell by 0.2% to 5.1% and 5.2% APR respectively.

Good news for those seeking a £10,000 loan, too, with the average having dipped by 0.1% to 5.1% APR. Not only that, but the reductions mean that all higher tier loan rates are now the lowest ever recorded, so if you need to borrow some serious cash, now's a great time to do so!

However, it's equally as positive for those seeking smaller loans: the average APR for a £5,000 loan remains just shy of its record low (7.4% set in March this year) and now stands at 7.6%, after falling by 0.2% over the last three months. Despite not quite being a record, this tier still remains lower than that seen when we first recorded this data in 2006, with only small borrowing amounts remaining above this level.

Even so, this sector of the market also saw reductions on a quarterly basis, with the £1,000 and £3,000 tiers both falling by 0.2% to stand at 20.0% APR and 14.9% APR respectively. Or, if you're looking for a £2,000 loan, it'll now come with an average APR of 19.2% (after a quarterly drop of 0.1%).

These rate cuts come despite the fact that the number of products and loan providers has remained entirely static, which suggests that providers are focusing on becoming more competitive with their current ranges – and they're cutting rates all over the place. Indeed, it's now possible to get a loan of £7,500 for as little as 3.2% APR – check out our personal loan calculator to take a look – so it's really never been better for borrowers.

… and 0% interest terms

However, in slightly less positive news, the figures reveal a different pattern in the credit card sector. Here, competition has actually fallen, continuing the trend witnessed during April-June.

The 0% interest sector has been particularly impacted, with the number of 0% purchase credit cards falling by three from June and 15 on an annual basis to stand at 95. This had a knock-on effect on the average purchase term, which fell by four days on a quarterly basis to stand at 280.

Meanwhile, the 0% balance transfer sector saw a marginal quarterly increase in availability, with the number of such cards available rising by one to 118, but it remains lower on an annual basis. The average balance transfer term has also dropped for the second consecutive quarter to stand at 586 days, the lowest seen since November 2015 and a significant drop of 20 days from June.

However, it's important to remember that these are just averages, and taking a quick look at our credit card best buys will soon give you a hint as to the deals available. For example, it's possible to get a card with a 28-month 0% purchase term, as well as a balance transfer card that'll result in no interest for as long as 41 months, so it really could pay to do proper comparisons.

It could also pay to take a look at the rewards sector, which is the only area to buck the credit card trend. Indeed, there's been a significant rise in the number of reward cards on offer with 87 such cards now available, up from 80 in June, with this including cashback credit cards as well as those that come with different kinds of reward schemes. Take a look to see what's on offer, and make the most of the situation.

What next?

Use our loan calculator to see if you can get a record-breaking deal

Compare the top credit cards

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.