Many people looking to get on the property ladder are enquiring about loans as most of them need some extra cash for deposits or costs related to the home purchase, new study from MoneySuperMarket has found.
A total of 16 per cent of the polled 1,000 UK adults said they had enquired about a loan either to pay for new housing or to cover the cost of home improvements. Second- biggest reason for borrowing was for business (10 per cent) followed by education (9 per cent) and transport (9 per cent).
The survey was part of MoneySuperMarket’s research into personal loan rates, which have hit a record low level.
Actually, the average rates on personal loans of £5,000 as well as £7,500 are at their lowest ever, the research shows.
Rates on £5,000 have plummeted 21 percentage points since the beginning of this year and they now stand at just 6.05 per cent. The rates on £7,500 loans now stand at 4.19 per cent, which is 16 percentage points below the 5.01 per cent average rate in January 2015.
Headline rates on larger loans have also been falling. Some lenders have substantially reduced the rate loans in the £15,001-£19,999 bracket over the last month. Most notably, Sainsbury’s has dropped the rate of its higher borrowing option by a considerable 1.3 percentage points, now at 3.6 per cent down from 5.8 per cent when taken out over a maximum 36 month repayment term.
Rates below 4 per cent were not unusual in the higher borrowing category, but they were ‘existing customer only’ loans. Since the beginning of July, both Sainsbury’s and Cahoot (loans provided by Santander) have re-priced loan rates to 3.6 per cent, opening up a more competitive loans market. Overall, Ratesetter has the lowest loan rate in this category at 3.5 per cent but comes with a £51 borrowing fee.
Kevin Mountford, head of banking at MoneySuperMarket said: “Anyone thinking about borrowing money should take advantage of these low rates now, as there is no guarantee on how long they will remain at this level, especially with recent speculation of a rise in Bank of England Base Rate.
“It’s especially interesting to see such drastic rate reductions in the larger loans bracket where rates now mirror those on offer in the medium loan size category. Banks are willing and able to lend money at the moment and the reduction in these larger loan rates for those borrowing between £15,001 and £19,999 is a good indicator that lenders are looking to entice those looking for a large level of borrowing, who in the past may have opted to remortgage for those amounts due to the lower rates on offer. They now have the choice to do this without the lengthy process of obtaining a mortgage which is secured on their property.”
