Consumer credit rates remained stable in May

Rates on consumer credit products either remained steady in May or registered small declines, according to analysis of the latest Bank of England data from Freedom Finance.

The figures showed that on average quoted household interest rates came despite market volatility leading to disruption in the mortgage market with widespread product withdrawals and notable increases to rates on fixed-term deals. 

The data across the four major consumer credit products selected by the Bank of England showed that £5k personal loan rates remained at 10.33% in May and have risen from 10.16% in January. In the same month in 2021, rates were 8.14%.

Meanwhile the £10k personal loan rates decreased slightly to 5.86% in May from 5.90% in April and 5.91% in January. 12 months ago rates were at 4.02%.

Whilst credit card rates stayed at 22.76% in May, representing a slight increase from 22.42% in January and an increase from 21.38% compared to the same month a year ago.

The research also showed that overdrafts rates have been steady throughout 2023, remaining at 35.25% in May and marking a tiny uptick from 35.24% in January. The average rate was also 35.24% in May 2021.

Andrew Fisher, Chief Growth Officer at Freedom Finance said “The markets have been relatively becalmed through the first half of the year until May when an upside surprise to core inflation data set in motion further turbulence including marked volatility in the residential mortgage sector.”

“The consumer credit market remained steady through May, however, with personal loans and credit cards either staying at April’s levels or even becoming slightly cheaper, on average. Debt consolidation has been a major driver of activity and with continued rate rises likely we expect to see more households searching for products to reduce the borrowing costs of existing credit.”

“Turbulence in the market is always a good reminder for consumers to return to solid best practise when hunting for credit products. This includes shopping around, ideally using digital marketplaces which not only compare multiple providers via a single search but also use soft-search technology to only show products that borrowers are eligible for.”

“It simplifies what can be a confusing search, minimises credit score risk from declined applications and increases confidence in the process.”