18 March 2005
Figures released yesterday have revealed that the cost of taking out a personal loan has fallen during the past 12 months in spite of three separate interest rate rises.
The Bank of England has raised the base rate of borrowing in the UK from 4.0 to 4.75 per cent since 2003 and is widely expected by city economists to raise interest rates again soon to a three-and-a-half-year high of five per cent.
But the price of loans is largely defying predictions and falling.
Four of the top six loan suppliers this year - who charge between 5.7 and 6.9 per cent for a £5,000 three-year loan - are offering cheaper products than last year.
Interestingly, of the six least expensive personal loan suppliers in March 2004, only Nationwide has made the top six list again this year as a result of increased competition.
"We've seen competition hotting up during the last few weeks and new lenders such as Giraffe Loans are pushing the established companies hard," explained one city analyst.
"And whilst providers continue to fight for market share it's unlikely we'll see any big rises in personal loan rates."
The report also revealed that internet loans are no longer top of the loan charts following last year's dominance.
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