Borrowers benefit from improved rates in 2013
Borrowers looking to take out a personal loan, mortgage or credit card in 2013 could benefit from greater competition in the market as a result of the Bank of England's Funding for Lending Scheme.
According to analysis by MoneySupermarket average rates on some mortgages and personal loans have fallen, while lower balance transfer fees on credit cards and longer promotional offers, mean people who need to borrow are benefiting from cheaper rates.
The comparison site compared the current deals on a range of popular financial products including personal loans, mortgages and credit cards, to those offered in January 2012 and found 2013 looks as though it is going to be a better year for borrowers.
Recent rate cuts from lenders such as Yorkshire Bank has resulted in the lowest ever personal loan rates. The average personal loan rate at £7,500 has fallen 1.24 percentage points to 10.26 per cent, meaning anyone borrowing this amount over five years would save an average of £251 in interest compared with taking out a loan this time last year.
Some mortgage rates have also fallen. Average rates have decreased across three and five year fixed rate mortgages, with the average three year fix rate falling 0.37 percentage points, while the average five year fix rate is down by 0.42 percentage points. However, those looking for a two-year fixed rate deal will pay 0.03 percentage points more than this time last year. Additionally, the average rate on two-year tracker mortgages has risen by 0.20 percentage points and three year tracker mortgages by 0.37 percentage points, although rates on these two product types have fallen since the turn of this year.
The total number of mortgages available is lower now, than it was this time last year. There are currently 2,983 products compared with 3,174 last January, however, there was only 2,373 products available when the Funding for Lending scheme was launched in August 2012.
The analysis also looked at credit cards, and found good news for those needing to consolidate their credit card debt, as the average balance transfer fee has decreased by 0.13 percentage points to 3.05 per cent across the top five providers. Barclaycard's Platinum Card with Extended Balance Transfer, offering zero per cent interest for 24 months remains the market-leader leader with the longest promotional period, but the competition is catching up. The average interest free period across the top five cards has lengthened from 22.4 months in 2012 to 23.2 months.
Kevin Mountford, head of banking at MoneySupermarket, said: "The New Year is a time when households will be reviewing and looking to make savings on their personal finances, so falling interest rates is great news for those with borrowings. While the Bank of England's Funding for Lending scheme has led to lower rates for savers, borrowers are enjoying the flipside of that. The availability of cheaper funding for lenders is helping boost overall competition in the market, so now is a good time for individuals to put in the research and shop around. We've recently seen providers such as Nationwide and Woolwich reducing rates across their mortgage ranges, and it is likely we will see others follow suit in the coming weeks.
"While there hasn't been a new entrant challenging Barclaycard's 24 month 0 per cent balance transfer offer our analysis shows lenders are attracting consumers with lower transfer fees. Lloyds TSB, for example, is offering a 50 per cent reduction on its balance transfer fee on its Platinum Credit Card, the equivalent of a 1.50 per cent fee, which is still great for anyone looking to consolidate their debts.
"Using a comparison site such as MoneySupermarket is a good way to look across the various products offered. Consumers should ensure they take the time to research beyond the headline rate to find the best product to suit their needs and circumstances."