Consumer credit rates stable in May amid volatility

Rates are still at high levels following continued Base Rate increases from Bank of England.

Rates on consumer credit products either remained steady in May or registered small declines, according to analysis of the latest Bank of England data from Freedom Finance.

The figures on average quoted household interest rates came despite market volatility leading to disruption in the mortgage market with widespread product withdrawals and notable increases to rates on fixed-term deals.

The data across the four major consumer credit products selected by the Bank of England showed that, for £5k personal loans, rates remained at 10.33% in May and have risen from 10.16% in January. In the same month in 2021, rates were 8.14%.

Meanwhile, for £10k personal loans, rates decreased slightly to 5.86% in May from 5.90% in April and 5.91% in January. 12 months ago, rates were at 4.02%.

Andrew Fisher, Chief Growth Officer at Freedom Finance, commented: “The markets have been relatively becalmed through the first half of the year until May when an upside surprise to core inflation data set in motion further turbulence including marked volatility in the residential mortgage sector.

“The consumer credit market remained steady through May, however, with personal loans and credit cards either staying at April’s levels or even becoming slightly cheaper, on average. Debt consolidation has been a major driver of activity and with continued rate rises likely we expect to see more households searching for products to reduce the borrowing costs of existing credit.”