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Great news for borrowers – loan rates are falling!

Great news for borrowers – loan rates are falling!

Category: Loans

Updated: 17/08/2017
First Published: 18/09/2015

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 It is now over 6 months old so the content may be out of date.

Thinking of getting a personal loan in the near future? Well, you're picking a great time to do it – rising competition in the personal loans market led to a drop in average rates across the board during the quarter, a phenomenon not witnessed since September last year, and many are now at their lowest ever levels!

Our data shows that there's been a considerable amount of activity in the sector over the last three months, with several new products launched and a raft of providers reducing rates, some significantly. TSB, for example, reduced one of its personal loan tiers by 10.1% APR in August, the largest reduction of the quarter, which just shows how intense competition is becoming.

The bulk of rate reductions weren't quite so extreme, but the sheer number of them led to all tiers seeing a drop in average rate to August, typically in the region of 0.3%-0.4%. Significantly, this was the first time that all tiers posted monthly reductions in almost a year – the trend was last recorded in September 2014 – which builds on the general reduction in the cost of borrowing seen over the last year or so.

Not only that, but the majority of tiers posted rate reductions on a quarterly basis – bar rates at the £10,000 tier which remained unchanged overall, despite recording monthly movements – the largest being in the £2,000 tier, with the average falling by 0.7% from June.

Another notable finding was in the £5,000 sector: the average rate for a loan of this size now stands at 7.6% APR, a drop of 0.5% on a quarterly basis, meaning it's become the lowest average rate ever recorded for this tier! Essentially, this means that those seeking a low to mid-tier loan really will be able to grab a bargain, with rates at £7,500 and £10,000 hitting fresh record lows of 5.7% APR.

In fact, all average rates at £5,000 and above are comfortably below those we first recorded in 2006, so there's never been a better time to take out that loan. By all accounts, it looks like this general pattern could continue, with ongoing, and indeed heightened, competition in the market suggesting that further reductions could be on the cards.

Not only that, but consumers are becoming more confident in their finances – latest statistics from the British Bankers' Association show that demand for credit and borrowing through personal loans continues to rise, reflecting stronger household finances and improved credit availability – which could potentially fuel this competition even more.

Want to make the most of things? Well, get on board! The figures we've mentioned are only averages, after all, and you could find far cheaper rates if you make the time to look. Use our personal loan calculator to get started, and see how low a rate you could get – and how low your repayments could be as a result.

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.