Average quoted household rates on credit cards hit 22.76%

Analysis of the latest Bank of England data on average quoted household interest rates from Freedom Finance has shown that credit card rates continue to increase to multi-decade highs despite other forms of consumer credit beginning to cool.

The data shows thatthe cost of consumer credit shows that average rates on credit cards have reached 22.76%. It marks a notable uptick from the first quarter of the year – when rates had dropped back to 22.42% – and average rates are now at their highest level since December 1997 (22.77%). With inflation in the UK remaining persistently high, rising credit card rates also reflect a tightening credit market as the latest BoE figures show that consumer credit availability is as limited now as in the early stages of the pandemic and worse than in 2008.

While credit card rates remain hot, the personal loan market has stabilised at the start of the year. £5k and £10k advances have both become less expensive since December 2022 with average rates falling to 10.07% (down from 10.19%) and 5.87% (down from 6.01%) respectively.

Overdraft rates have remained broadly stable for the past nine months and stand at 35.27%, a slight increase compared to the end of 2022 (35.26%).

Andrew Fisher, Chief Growth Officer at Freedom Finance, said “Despite a calming macro-economic environment, credit card rates continue to reach new highs for this millennium and are now approaching an all-time record.”

“Inflation remains persistently high and rate-setters are expected to announce a further hike to the base rate today which could fuel concerns of a looming ‘credit crunch’ and push average rates up even further.”

“In this environment, it is pleasing that personal loan rates have stabilised and have even fallen from their peak through the first months of the year. Continued rate rises may reverse some of these declines but with rates on these products far lower than credit cards, it demonstrates how important it is that consumers are shopping around the whole market to find solutions that best suit their circumstances.”

“For example, a personal loan may offer more flexible terms and lower repayments than servicing credit card debt, and digital marketplaces can help consumers compare products at the best rates while using soft search technology to find those that they are eligible for before having to make an application.”

“Our five-point plan for consumer credit is a great place for those taking their first steps or exploring their options in the borrowing space and we urge best practice at an important time for our personal finances.”