Average unsecured loan rates highest in six years

The average rate for a £7,500 unsecured loan for five years stands at 5.6%, its highest point in over six years. This was in January 2016, when this figure stood at 5.7%.

Year-on-year, this average figure is up 1.2% with several providers increasing their rates. Currently, the lowest rate for new customers stands at 3.1% compared to 2.8% three months prior.

This is not the only tier to rise, with the average unsecured personal loan rate for £5,000 over three years and £10,000 over five years up compared to the beginning of June 2022.

Lenders typically keep the £7,500 tier competitive as it is widely used as a representative APR, but we could see further rises to come if the potential risk for borrowers to default is elevated and lenders perhaps becoming more subdued with pricing competitively.

“Managing debts and spreading the cost of any large purchases in the months to come is crucial,” said Rachel Springall, Finance Expert at Moneyfacts.

"As the cost of living rises it is vital consumers keep up with their repayments and switch deals if possible if they are being charged interest,” she said.  

It is always wise consumers check their credit score before they make any applications for a loan or credit card and seek advice if they are struggling with their debts.

In the year to August, secured loan borrowing increased by almost 75%, according to Loans Warehouse.

In brief, secured loans differ from unsecured loans because there is some form of an asset, usually your home, which is used as collateral in the event of a missed payment. More information on these differences can be found in our guide to secured loans.

For August, second charge lending totalled £166.5 million, approximately £5.2 million more than what was recorded the month prior.

It means annual growth has increased again, and will likely surpass £1.75 billion, according to Matt Tristram, Co-Founder & Director of Loans Warehouse.

“The most noticeable change in August’s figures to recent months is the drop in lending above 85% Loan-To-Value, down 3.33% on July 2022,” he said.

“Completion times have seen a slight decrease as lenders have successfully recruited in recent months to manage the increased demand,” Tristram concluded.