Money Insider: Cheaper rates on bank loans don't go far enough

It's not just the high-street retailers that are trying to encourage us to keep on spending. Banks are also getting in on the act with some lower personal loan rates on offer as we kick off 2011.

The Government wants Britain to spend its way out of recession, but the 2.5 per cent VAT increase and the prospect of more job cuts do not really provide consumers with much of an incentive, so news of lower loan rates will be music to the ears of the Chancellor and his colleagues.

Over the past 10 days we have seen Tesco Bank, HSBC, Barclays, First Direct and Sainsbury's Finance all cut rates on personal loans above £7,000. Sainsbury's is currently the best buy at an annual percentage rate (APR) of 7.4 per cent after trimming the cost by 0.3 per cent for its Nectar card customers.

While this is welcome news, all the lower rate deals are reserved for existing customers only (with the exception of Tesco Bank). The other downside is that lower interest rates are not available on smaller borrowings, so for anyone looking to borrow a sum of £2,000 to £3,000, the interest will be well into double figures and in some cases approaching 20 per cent APR.

Smaller loans may be considered by lenders to be less profitable and historically a greater risk. However, if consumer spending is to remain strong throughout this year they need to do their bit by introducing rate reductions across the board.

Norwich BS revises gold account costs

On Tuesday, the Norwich and Peterborough Building Society revamped its Gold Classic Current Account. The minimum funding requirement was reduced from £1,500 to £500 per month and the charge for unpaid items slashed from £29.50 to £15.

A great new benefit of the account is that there are no charges for cash withdrawals by debit card overseas, on or overseas retail transactions, which is a big plus point. But while its overdraft charges are now said to be "more transparent", it will not necessarily work out cheaper for everyone.

With the previous account, the effective annual percentage rate (EAR) on authorised overdrafts was 11.74 per cent, while the charge for unauthorised borrowing was 24.9 per cent. These charges have been replaced with just one EAR of 17.9 per cent. And if you make use of your agreed overdraft, you now pay a £5 monthly fee.

Affordable new homes are the only answer

It is not often I agree with Government economic policy, but I am fully behind the Housing minister, Grant Shapps, who has called for greater stability in property prices. He hit the nail on the head by saying: "Property should be primarily thought of as a place to be your home."

For too long, people were obsessed with bricks and mortar and saw their home as a cash machine to be raided if they needed a new car or to pay off credit cards. Many also saw constant house price inflation as a reason not to contribute to a pension scheme, expecting their home to be a source of income in later life.

Property prices staying flat or falling slightly will not be the end of the world some scaremongers lead us to believe. In fact, price stability is exactly what is needed if large numbers of first-time buyers are ever to return to the market. We don't want our children forced out of it because they cannot raise a £20,000 deposit or do not qualify for a mortgage because the borrowing equates to six times their annual salary.

Let's hope the Coalition backs its words with actions. Building more affordable homes will help to increase supply and dampen prices, so over to you, Mr Shapps.

Andrew Hagger is an analyst at Moneynet.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
Denny Miller in 1959 remake of Tarzan, the Ape Man
people
Arts and Entertainment
Cheryl despairs during the arena auditions
tvX Factor review: Drama as Cheryl and Simon spar over girl band

News
Piers Morgan tells Scots they might not have to suffer living on the same island as him if they vote ‘No’ to Scottish Independence
news
News
i100Exclusive interview with the British analyst who helped expose Bashar al-Assad's use of Sarin gas
PROMOTED VIDEO
Sport
Angel Di Maria celebrates his first goal for Manchester United against QPR
Football4-0 victory is team's first win under new manager Louis van Gaal
Arts and Entertainment
art
News
newsIn short, yes
Arts and Entertainment
Rob James-Collier, who plays under-butler Thomas Barrow, admitted to suffering sleepless nights over the Series 5 script
tv'Thomas comes right up to the abyss', says the actor
Arts and Entertainment
Calvin Harris claimed the top spot in this week's single charts
music
Sport
BoxingVideo: The incident happened in the very same ring as Tyson-Holyfield II 17 years ago
News
Groundskeeper Willie has backed Scottish independence in a new video
people
Arts and Entertainment
The Doctor poses the question of whether we are every truly alone in 'Listen'
tvReview: Possibly Steven Moffat's most terrifying episode to date
News
i100
Life and Style
Cara Delevigne at the TopShop Unique show during London Fashion Week
fashion
News
The life-sized tribute to Amy Winehouse was designed by Scott Eaton and was erected at the Stables Market in Camden
peopleBut quite what the singer would have made of her new statue...
Sport
England's Andy Sullivan poses with his trophy and an astronaut after winning a trip to space
sport
News
peopleThe actress has agreed to host the Met Gala Ball - but not until 2015
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

    £280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Senior BA - Insurance **URGENT**

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Training Coordinator / Resource Planner - City, London

    £35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...

    Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)

    £400 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...

    Day In a Page

    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week
    The fall of Rome? Cash-strapped Italy accused of selling its soul to the highest bidder

    The fall of Rome?

    Italy's fears that corporate-sponsored restoration projects will lead to the Disneyfication of its cultural heritage
    Glasgow girl made good

    Glasgow girl made good

    Kelly Macdonald was a waitress when she made Trainspotting. Now she’s taking Manhattan
    Sequins ahoy as Strictly Come Dancing takes to the floor once more

    Sequins ahoy as Strictly takes to the floor once more

    Judy Murray, Frankie Bridge and co paired with dance partners
    Wearable trainers and other sporty looks

    Wearable trainers and other sporty looks

    Alexander Wang pumps it up at New York Fashion Week
    The landscape of my imagination

    The landscape of my imagination

    Author Kate Mosse on the place that taught her to tell stories