Cost of credit cards and personal loans continue persistent growth

Analysis of the latest Bank of England figures1 from Freedom Finance, one of the UK’s leading digital lending marketplaces, shows that rates on all major forms of consumer credit rose again in September continuing the upward trend in the cost of borrowing that has persisted all year.

Household budgets are already facing a severe winter squeeze as inflationary pressures and the spike in energy bills take hold, while the spectre of rising mortgage rates could see many the finances of many homeowners come under mounting pressure.

In response to growing financial concerns Freedom Finance has issued its own five-point plan to help consumers manage their credit commitments and ensure they are taking advantage of all the tools at their disposal to improve their financial situation. The warning comes as analysis of the data shows:

  • Average credit card rates jumped a further 0.08 percentage points in September to hit 21.88% – the highest average monthly rate since December 1998 (22.19%).
  • The average quoted rate for a £10k personal loan rose for a seventh successive month, increasing by a further 0.09 percentage points to 4.43% at the end of September. It is now at a seven year high and at a level not surpassed since December 2015 (4.45%).
  • The average rate for a £5k personal loan ticked up to 8.39% in September and is at its highest level since March 2017 (9.54%).
  • Overdraft rates are at an all-time high, nudging up 0.01 percentage points to 35.30% in September; rates spiked in April 2020 when new regulations were introduced but they have been consistently rising to new highs even since then.

Emma Steeley, CEO at Freedom Finance, commented: “Consumers cannot control the upward trajectory of the cost of consumer credit, but they must ensure they are taking all the measures available to them to get the best and most appropriate products for their circumstances.

“Digital marketplaces are a great way to shop around as they automate the process through just a single application and, as they use soft-search technology, consumers will only be offered loans or credit cards that they are definitely eligible for.

“The lending industry can play a positive role in helping people manage their money through this difficult period, using its data assets to provide the most appropriate offering to customers.”