Credit card and personal loan rates post first quarter decline

It is the first-time rates on all three products have registered a quarterly decrease since the second quarter of 2020, amid the outbreak of the pandemic.

The analysis of the Bank of England data, conducted by Freedom Finance, found that the average rates on £5,000 personal loans dropped by 0.10% in the first quarter of 2023, falling back to 10.09%.

This follows quarterly increases of 0.28%, 0.20% and 1.79% in the second, third and fourth quarters of 2022, respectively, so rates are still far higher than in the first quarter of 2022 – 7.92%.

Additionally, rates on £10,000 personal loan rates dropped by 0.13% off the back of significant previous quarterly increases of 0.24%, 0.23% and 1.65% through the final three quarters of 2022. It means average rates are 5.88% as of the first quarter of 2023 compared to 3.89% a year ago.

Credit card rates nudged down by 0.01pp through the first quarter of 2023, however they have increased by over a full percentage point over the past 12 months, rising from 21.42% in the first quarter of 2022 to 22.47% as of the latest data.

Overdraft rates remained steady at 35.26% in the first quarter of the year but have grown from 33.99% in first quarter of 2022 to record fresh all-time highs.

Andrew Fisher, chief growth officer at Freedom Finance, commented: “Relative market calm and an expectation that inflation will now trend downwards have helped to drive down rates across all major consumer credit products in the first quarter of the year. However, uncertainty lingers over the course of the Bank of England’s base rate which could also impact the cost of borrowing.

“Our message for those hunting for credit remains the same: use the technology available, shop around and explore different products to make sure you are getting a deal that suits your circumstances.”