Money Insider: Cheaper loans will be good for consumers and the economy
Saturday 15 September 2012
It's not just the high street stores that are doing their utmost to encourage consumers to keep on spending via high-profile sales promotions. The banks are getting in on the act too, with new lower personal loan rates on offer as we approach the final quarter of 2012.
The Government needs the country to spend its way out of recession, but the current economic woes and prospect of more job cuts don't really provide consumers with much incentive, so news of cheaper loans will be music to the ears of the George Osborne and his Treasury colleagues.
In the past 14 days we have seen Tesco Bank, Barclays and Sainsbury's Bank all cut rates on their personal loans for sums of £7,500 and above.
With cost-of-living increases eating into consumer budgets, lenders realise that they need to offer more attractive rates to stimulate the loans market.
However, it's probably no coincidence that we're seeing more lenders starting to offer cheaper unsecured borrowing so soon after the launch of the Government's Funding for Lending scheme, and if that is one of the drivers, then it's exactly what the initiative is supposed to achieve.
It is also possible that some lenders are falling behind the annual lending targets they set themselves at the beginning of the year and are trimming rates to try to boost the take-up.
The best rates currently available are 13.9 per cent APR for £2,500 from First Direct, 7.1 per cent APR for £5,000 from Sainsbury's Finance, and 5.7 per cent APR for a £7,500 to £15,000 advance from Tesco Bank.
If you compare these rates with what was available 12 months ago, the best deals are cheaper across all amounts, with the £2,500 loan rate down 1 per cent APR, £5,000 by 0.8 per cent APR and the £10,000 loan by 0.7 per cent APR.
The 5.7 per cent APR representative rate from Tesco Bank is one of the lowest seen for more than five years, but you'll need to get your skates on of you are interested as it is a limited offer due to end on 24 September.
The biggest bugbear for borrowers is that lower interest rates are not generally available for smaller loans, so for anyone wanting to borrow between £2,000 and £3,000, the interest rate is well into double figures, and in many cases pushing 20 per cent APR.
If you're looking to borrow a smaller sum of money, then it makes financial sense to consider using a specific type of credit card, an often overlooked but cost-effective alternative.
I'm referring to the MBNA Rate for Life credit card, where the interest rate is fixed at 5.9 per cent APR for as long as it takes you to repay your borrowing and the rate is the same however much you borrow, as long as your credit rating is in good nick.
This particular credit card lets you transfer funds to your current account for a one-off 4 per cent transfer fee, and is an excellent option for those looking to borrow £5,000 or less.
For the banks, loans for smaller amounts may be considered less profitable and historically a greater risk, but if consumer spending is to start to pick up throughout the remainder of this year and into 2013, then lenders need to do their bit by being slightly less selective and offering cheaper interest rates across the board.
Close Brothers' fixed-rate savings bond is the top best buy
In a market increasingly starved of decent returns, Close Brothers Savings this week launched a market-leading, new, two-year,
fixed-rate bond paying 3.75 per cent annual equivalent rate (AER).
This is welcome news for savers because in recent months, banks and building societies have been cutting their rates. Returns have been gradually tailing off across all terms from one to five years with the average for a two-year bond falling from 3.37 per cent AER in April to just 3.06 per cent AER today.
The Premium Gold bond from Close Brothers can be opened online or by phone 020 7392 1772 with a minimum deposit of £10,000. Withdrawals are not permitted during the term of the bond, and interest is paid to your nominated bank account on the anniversary of the date the account is opened and again at maturity.
This bond is a limited offer and as with other recent best-buy fixed-rate deals is likely to be snapped up by savers desperate to lock into a competitive deal as rates across all savings products continue to decline.
Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Emergency call 'started off dumb, but got pretty serious'
Britain First criticised for using actress's memory to draw attention to their 'hate-filled home page'
Thought you'd seen it all after the Jeremy Paxman interview?
Greatest mystery about the hit BBC1 show is how it continues to be made at all, writes Grace Dent
"History is violent," says the US Army tank commander Don "Wardaddy" Collier
Animal welfare charities have urged the boy band to cut the scenes
Argentinian scored 'rabona' wonder goal for Tottenham in Europa League – see it here
Mark Dampier: Woodford’s young companies could be the stars of the future
10 tips for taking out a personal loan
You'll need £220,000 for a minimum wage in your retirement
Questions of Cash: Something rotten in the cellar causes trouble up above
Weekly Money: round-up of the personal finance stories you may have missed 20-24 October
- 1 This 'woman calls police to order pizza' story isn't going where you're expecting
- 2 Watch what happened when food critics were unknowingly served McDonald's
- 3 Jimmy Carr's controversial Oscar Pistorius joke goes a bit too far at the Q Awards
- 4 Ottawa shootings: Bruce MacKinnon's cartoon is the perfect tribute to soldier Nathan Cirillo
- 5 Of course, teenage girls need role models – but not like beauty vlogger Zoella
Of course, teenage girls need role models – but not like beauty vlogger Zoella
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Support for EU membership 'at highest level since 1991' with most Brits wanting to stay 'in'
Thousands with degenerative conditions classified as 'fit to work in future' – despite no possibility of improvement
Residents should throw a street party and mix with immigrant neighbours, councils told
Attacks on 'Ukip Calypso' show how skewed people’s priorities are
iJobs Money & Business
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
£100 - 125k: Guru Careers: A CTO / Chief Technology Officer is needed to join ...
Competitive (DOE): Guru Careers: A COO / Chief Operating Officer is needed to ...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village