Credit card rates are continuing to increase to multi-decade highs despite other forms of consumer credit beginning to cool.
According to analysis of the latest Bank of England data on average quoted household interest rates by online broker Freedom Finance, average rates on credit cards have reached 22.76 per cent, their highest level since December 1997.
In contrast, the personal loan market has stabilised since the start of the year. £5,000 and £10,000 loans have both become less expensive since December 2022, with average rates falling to 10.07 per cent (down from 10.19 per cent) and 5.87 per cent (down from 6.01 per cent) respectively.
“Despite a calming macro-economic environment, credit card rates continue to reach new highs for this millennium and are now approaching an all-time record,” Andrew Fisher, chief growth officer at Freedom Finance said.
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“Inflation remains persistently high and rate-setters are expected to announce a further hike to the base rate today which could fuel concerns of a looming ‘credit crunch’ and push average rates up even further.
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“In this environment, it is pleasing that personal loan rates have stabilised and have even fallen from their peak through the first months of the year. Continued rate rises may reverse some of these declines but with rates on these products far lower than credit cards, it demonstrates how important it is that consumers are shopping around the whole market to find solutions that best suit their circumstances.”
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The analysis follows a survey earlier this year that found UK adults are borrowing more amid the cost-of-living crisis.
The data from the Office for National Statistics revealed that more than a fifth of adults in Great Britain, which equates to 22 per cent or around 11.5 million people, have reported borrowing more money or using more credit than in the previous year.
