Personal loan rate rise
Overdraft rates also on the increase
The latest analysis from Freedom Finance shows the average rate for a £10,000 personal loan was 4.06% in May 2022. This percentage is the highest it has been since September 2016 when it was at 4.11%.
Personal loans worth £5,000 have also increased to recent highs with an average quoted rate of 8.35% last month - a level not witnessed since March 2017 when it was at 9.54%.
The average overdraft rates substantially increased in April 2020 to 30.47% compared to 24.21% the previous month following new regulations that required firms to charge a simpler annual interest rate.
More recently overdraft rates have risen to record highs - with average rates hitting 35.26% in May 2022. This is a significant rise from the 34.12% recorded in April 2022 which was in itself the first time rates had exceeded 34%.
According to Freedom Finance’s chief marketing officer David Hendry, the data demonstrated the economic environment was having an impact on the cost of consumer credit borrowing. He explained: “The Bank of England is raising interest rates to try and limit inflationary pressures, but the cost of borrowing is also growing.
“It is a further blow for consumers who are starting to see noticeable increases in mortgage and other consumer credit rates. Personal loans are now at their highest level in over five years while overdraft rates continue to reach new records.
“For people with existing debt or struggling to make ends meet, it is vital that they are thinking about how they reduce their repayments on existing credit by finding the best possible rates available to them.”
