Those looking to borrow to finance home improvements may not be able to take advantage of an interest-free advance from the Conservative Party headquarters, but they can take advantage of a recent drop in loan rates.
Despite the ongoing pandemic, banks and other lenders have cut loan rates since January, with lower value loans falling between £ 5,000 and £ 7,500, with their costs falling the most.
Average borrowing costs of £ 5,000 have fallen from 7 percent last April and 7.2 percent at the beginning of this year to 6.9 percent this month, according to Moneyfacts figures.
That’s the lowest level since September 2019, and close to the low of 6.7 percent in January two years ago.
Prime Minister Boris Johnson’s renovation of his Downing Street flat is under investigation by the Election Commission
While interest rates on £ 10,000 borrowing have not fallen that much in the past year and are 0.2 percentage points higher than in April last year, personal loan rates of £ 10,000 are still near their lows.
They now average 4.4 percent, with rates as low as 2.8 percent. This is money reported in December 2019 that with interest rates on loans of £ 10,000 at an average of 4.5 percent, it was the cheapest time ever to borrow £ 10,000.
They hit a new low of 4.2 percent last April, against 9.9 percent in December 2009 and 5.7 percent in December 2014.
If you borrowed £ 10,000 from Cahoot and paid it back in five years at a rate of 2.8 percent, you’d pay back £ 10,718.40 in total. MBNA, M&S Bank and John Lewis also offer rates of less than 3 percent.
Moneyfacts’ Rachel Springall said, “Overall, we see more decreases than increases. Unsecured personal loan lenders are clearly still in the mood to borrow at this point.
“Typically, lenders would price higher based on the risk of taking on new debt.”
There are now 34 lenders offering 43 loans, according to Moneyfacts figures, slightly below the January 2020 level when 36 lenders offered 46.
|Month||Average rate on a loan of £ 5,000||Average rate on a £ 10,000 loan||Number of lenders||Number of loans available|
Banks that have lowered their borrowing rates since January include Metro Bank; JN Bank, a relative newcomer based in Brixton; Virgin Money and Sainsbury’s Bank.
TSB has increased theirs, while M&S Bank has increased rates for very low value loans between £ 1,000 and £ 5,000 and borrowing in excess of £ 15,000.
Springall noted, however, that “lenders only need to offer advertised rates to 51 percent of successful applicants.”
Unsecured personal loans are an often popular choice for those looking to finance major purchases such as a new car or significant home improvements, although the comparison site MoneySupermarket warned against using them for major structural works such as a sunroom or attic conversion.
“These jobs often take a lot of money and time, and a large enough unsecured loan may not be available,” said the site’s Jo Thornill.
Boris Johnson and his fiancé Carrie Symonds have reportedly spent a whopping £ 200,000 refurbishing the flat above 11 Downing Street.
Interest in home improvements and DIYs has skyrocketed over the past 12 months as Britons spent a lot more time indoors during the pandemic and many had more money to fund them.
Rachel Springall added, “Unsecured personal loans are an ideal choice for consumers who want to know exactly how long they have before their debt is repaid as they offer a simple fixed repayment plan.”
And while they charge interest, they are unlikely to result in anyone renovating their flat being investigated by the Election Commission, what happened to Prime Minister Boris Johnson on Wednesday morning.
Jo Thornhill added: ‘When a home renovation goes well, there are few things that are more satisfying. But when they go wrong, they can be a major source of concern – just ask the Prime Minister. ‘
He is accused of failing to disclose the fact that the Conservative party’s funds were initially used to pay for the renovation of his Downing Street flat, for which he subsequently left.
Personal loans from banks are often available for amounts up to £ 25,000, and for as little as £ 1,000.
Those who borrow smaller amounts may be better off with an interest-free credit card. They can make the purchase in advance on a card and then transfer it to a 0 percent balance transfer and pay it off in as much as 29 months.
Alternatively, they can take out an interest-free purchase credit card with a term of up to 20 months and redeem it without interest.
Before applying, prospective borrowers can perform soft searches to see how likely they are to be accepted for a loan without performing a formal check that could hurt their credit score, although this may not indicate the rate they are will eventually have to pay.