Money News

Loans are getting cheaper

Average loan rates are finally starting to fall, as big name providers find the courage to lend again.

Nationwide, Halifax and Sainsbury’s have all reduced their loan rates in recent weeks, heralding good news for potential borrowers.

As a result, the average interest rate of the top 10 loan deals has fallen to 8.35%, according to Moneysupermarket.com. This is the lowest it has been since the Bank of England cut the base rate to 0.5% last March.

Historically, though, this rate is still very high. In 2006 the average rate of the top 10 loan deals was 5.8%, while the base rate was 4.5%.

Tim Moss, head of loans and debt at Moneysupermarket.com, pointed out: “This means over this period the top lenders have increased their profit margins by an eye watering 6.55%.”

He added, however: “Perhaps the tide is turning. Recent moves suggest lenders are willing to open their purse strings just a little wider.”

Chris Eagle, commercial manager at Creditchoices.co.uk, advised: “If you are looking for a cheap loan, be sure to compare loan rates from a variety of providers to get the best deal.

“Increasingly, lenders are reserving their best loan rates for existing current account customers, so it’s a good idea to pop into your own bank or building society to see what they can offer you.”