Rates on all major forms of consumer credit have declined since the end of 2022 through to February, new analysis from Freedom Finance has shown.

The broker looked at Bank of England data to find that average quoted household rates on credit cards, personal loans and overdrafts have all declined since the end of last year.

Following seven months of consecutive increases, £5,000 personal loan rates have now registered two monthly declines. Freedom Finance revealed they have fallen to 10.08% in February 2023, from 10.19% in December 2022, but remain far higher than the 7.73% recorded in February 2022.

Similar to smaller-sized personal loans, Freedom Finance’s analysis showed that £10,000 personal loan rates had recorded 10 consecutive monthly increases to the end of 2022, reaching 6.01%. They have since dropped back to 5.94% as of February 2023, compared to 3.84% in February 2022.

The analysis also considered credit card rates, and Freedom Finance found that these reached their highest level this millennium last year as they hit 22.48% at the end of 2022. They remain at historic highs but have dropped to 22.44% through to February 2023, although are up on 21.44% in February 2022.

Furthermore, overdraft rates have been steadily nudging up since new regulations drove a spoke in the recorded average quoted rates. As with the other products analysed, they have dropped back to 35.24% in February 2023, compared to 33.95% in February 2022, from all-time highs at the end of 2022.

Total consumer credit borrowing reached £1.6bn in January – its highest level since June 2022 – driven primarily by credit card borrowing alongside consumer confidence beginning to rebound despite remaining at historically depressed levels.

“Consumer credit has not escaped the economic and cost of living headwinds of the past year with average rates seeing substantial increases,” said chief growth officer at Freedom Finance, Andrew Fisher.

“However, with the interest rate raising cycle appearing to be near an end and the economic outlook brightening, I am delighted for our customers who can benefit from this as the cost of consumer credit borrowing starts to fall back just as we have seen in the mortgage market.

“If rates continue to fall we expect to see growing demand from consumers looking to consolidate debt, particularly those people who took out products when borrowing was at its most expensive. As ever, whether it is new borrowers or consolidators, following best practice and using all the tricks at their disposal will be vital to achieving good outcomes.”

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