Credit card rates dip; personal loans keep rising

Total credit card borrowing dropped in December as consumers repaid £0.5 billion of net credit card debt and this perhaps drove a more competitive pricing market in January. Average quoted household rates dropped to 22.46% in January 2023 compared to 22.48% a month earlier, but still remain at levels not seen since 1998 and have increased from 21.43% a year ago.

Personal loans continued to rise in price – albeit at a slower pace compared to previous months – with average rates for £10k personal loans nudging up to 6.02% in January from 6.01% a month earlier. Again, it still marks a significant uptick from a year earlier when rates stood at 3.94%.

The data comes amid record levels of lending from Credit Unions in the UK with total borrowing equalling £1.92 billion and growing by over £250 million over the past year as more people look for affordable borrowing products.

Emma Steeley, CEO at Freedom Finance, commented: “Consumer credit products have become increasingly expensive over the past year as a rising rate environment impacts how much we can borrow and at what price.

“While personal loans ticked up again in January, the cost of borrowing on credit cards dipped slightly which perhaps reflects a drop in borrowing as customers repaid over £460 million of the nation’s net credit card balance. It is unsurprising in this landscape that demand for Credit Union membership has been continually rising, and these co-operatives are now lending record sums of money.”