Personal Loan rates on the up as borrowers face a credit squeeze

Personal Loan rates on the up as borrowers face a credit squeeze

Andrew Hagger of Moneycomms.co.uk looks at the latest changes in the consumer lending market.

Personal borrowers have enjoyed record low personal loan rates and long term interest free balance transfer deals in recent years, but there are growing signs that the tide is starting to change.

Four of the most competitive personal loan providers were offering a 2.8% or 2.9% rate for a loan of £10,000 plus at the start of November, however one month later rates have been hiked and it’s becoming more expensive to borrow larger sums.

Personal loan lender	1 Nov 2017	1 Dec 2017	Increase
M&S Bank	2.80%	3.00%	0.20%
Sainsbury’s Bank	2.80%	2.90%	0.10%
TSB	2.80%	3.20%	0.40%
Clydesdale & Yorkshire Bank	2.90%	3.60%	0.70%

The loan rate increases have only impacted the larger loan amounts with rates unchanged for those borrowing say £3,000 – however the rates were already much higher at this level and with a greater margin to absorb the impact of the base rate increase.

At the same time credit card balance transfer deals continue to slide – at the turn of the year you could borrow at zero per cent for 43 months with both MBNA and Halifax, but these one-time market leaders have since slashed their interest free term by 6 months and 7 months respectively.

0% Credit Card lender	Longest term	Now	Decrease
Halifax	43 months	36 months	7 months
MBNA	43 months	37 months	6 months
Sainsbury’s Bank	42 months	37 months	5 months
Barclaycard	42 months	38 months	4 months
Nuba	42 months	38 months	4 months

The new squeeze on lenders is probably down to a number of factors, such as the recent base rate hike, concerns from the regulator and Bank of England regarding a possible credit bubble and inflation biting hard and reducing people’s disposable income.

I suspect that the sub 3% personal loan may soon become a thing of the past and I doubt we’ll ever see the record 43 month 0% balance transfer term breached again.

ENDS