After a period of relative calm for the consumer credit sector, average rates on lending products registered notable increases through June as fears over sticky inflation linger, according to analysis of the latest Bank of England data from Freedom Finance.
Through the first few months of the year, average rates on credit cards and personal loans had either plateaued or dropped from the highs of 2022 in a year characterised by the rising cost of household borrowing and living.
However, in June 2023 average quoted credit card rates rose from 22.76% to 23.10% – a significant monthly rise which takes rates to their highest level since December 1995.
The rise in the cost of credit cards was mirrored in the personal loan sector, however rates remain far below that of credit cards.
£10k personal loans increased from 5.85% to 6.02% through June – surpassing the 6.01% seen as at December 2022 – and marking the highest average rate in a decade (since October 2013).
£5k personal loans recorded a smaller rise with rates creeping up from 10.15% to 10.18% in June and have returned to similar levels last seen in December 2022 (10.19%).
Andrew Fisher, Chief Growth Officer at Freedom Finance said “After a period of calm, it appears consumer credit rates are now once again on an upward trajectory with credit cards reaching their highest levels in nearly 30 years.”
“While personal loan rates have ticked up slightly, they still offer borrowers the ability to access the credit market at more attractive rates. It could lead to increasing demand for personal loans as borrowers hunt for products to support their financial situation amid squeezed household budgets.”
“It emphasises the need for consumers to exercise best practise when looking for lending products – even in a rate-rising environment there are likely to be products that suit people’s individual circumstances and needs.”