In a week when the Chancellor unveiled his latest austerity measures, the banks showed no signs of pulling in their horns as a raft of low-cost deals hit the market.
Santander and Cahoot both cut interest rates for personal loans of £5,000 to 4.5 per cent APR, and have closed the gap on market leader Zopa at 4.3 per cent APR.
If you’re in the market for a slightly larger loan, the 3.6 per cent APR rate from Cahoot means it now shares the top spot with M&S Bank, Nationwide building society and Zopa.
The fight to win new customers in the credit card sector shows no signs of fizzling out either, as Virgin Money this week launched what it called its most boring card – with no interest to pay on purchases, balance transfers or money transfers for 24 months.
Barclaycard, the dominant player in the 0 per cent balance-transfer market, has just cut the transfer fee on its 36- month Platinum card from 2.39 to 1.99 per cent – a move that will reduce the cost of every £1,000 switched by £4.
But it’s not such good news if you want to borrow a smaller amount. The market has become more competitive but rates are still much more expensive than those seen at £5,000 and above.
For example, on a loan of £2,000, Zopa at 7.6 per cent APR and RateSetter at 8.3 per cent are the cheapest – but most high-street lenders are still charging interest rates well into double figures.
A different but cheaper option for smaller sums is an MBNA Platinum credit card, where you can transfer money from the card to your bank account at 0 per cent for two years subject to a one-off 1.70 per cent fee. On £2,000, that’s just £34 over two years if you clear within the term.
When you consider that Barclays and NatWest are charging 22.9 per cent APR for a £2,000 loan over two years, or around £4601, the MBNA money-transfer option looks like a smart move if you’re financially disciplined.
No doubt George Osborne would like to see this low-cost credit boom continue to keep driving consumer spending and help the wider economy.
But these deals won’t be around for ever. So if you’ve got a big purchase in mind, it may be better to make your move sooner rather than later.
Savings rates awaken
Savings rates have been in the doldrums for years, but things have improved slightly in the past few weeks, particularly in fixed-rate bonds.
Paragon, Vanquis and Charter Savings have been jostling for “best buy” status this summer and the latter launched a range of table-topping fixed- rate savings deals this week.
You may not yet be familiar with Charter, but it is fully regulated and has Financial Services Compensation Scheme (FSCS) protection. It is currently offering 2.06 per cent AER for one year and 2.15 per cent for 18 months, through to 3.05 per cent if you want a lock-in for five years.
The recent competition has brought better deals for those looking to stick with an FSCS- protected provider, although the level of protection is to be cut from £85,000 per person, per authorised provider, to £75,000 from next January.
If you’re looking for a better return and are prepared to take a calculated risk to secure a higher rate, the peer-to-peer providers Lending Works, Zopa and RateSetter are all worth a closer look.
Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.ukReuse content