Those looking to borrow to fund home improvements may not be able to take advantage of an interest-free advance from Tory headquarters, but they can take advantage of the recent drop in loan rates.
Despite the ongoing pandemic, banks and other lenders have slashed borrowing rates since January, with loans between £5,000 and £7,500 dropping their cost as far as possible.
The average cost of borrowing £5,000 fell from 7 per cent last April, and 7.2 per cent at the start of this year, to 6.9 per cent this month, according to figures from Moneyfacts.
This is the lowest since September 2019, and is close to an all-time low of 6.7 percent in January two years ago.
The Election Commission is investigating Prime Minister Boris Johnson’s refurbishment of his Downing Street flat
While £10,000 borrowing rates haven’t fallen as much over the past year, and are 0.2 percentage point higher than last April, £10,000 personal loan rates are still near an all-time low.
They now average 4.4 percent, with rates as low as 2.8 percent. This is the money it was reported in December 2019 that with rates on loans of £10,000 averaging 4.5 per cent, this was the cheapest time ever to borrow £10,000.
They reached a new low of 4.2 percent last April, From 9.9 percent in December 2009 and 5.7 percent in December 2014.
Borrowing £10,000 from Cahoot and paying it back over five years at a rate of 2.8 per cent would see a total repayment of £10,718.40. MBNA, M&S Bank and John Lewis also offer rates under 3 percent.
Rachel Springol of Moneyfacts said: “Overall we’re seeing more reductions than increases. It’s clear that unsecured personal loan lenders are still very excited about lending right now.
“Lenders usually set the rate back higher based on the risk of taking on new debt.”
There are now 34 lenders offering 43 loans, according to Moneyfacts figures, just below January 2020 levels when 36 lenders offered 46.
|Month||The average price on a £5,000 loan||The average rate on a loan is £10,000||number of lenders||The number of loans available|
Banks that have lowered their loan rates since January include Metro Bank; JN Bank, a relative newcomer based in Brixton; Virgin Money and Sainsbury’s Bank.
TSB raised its rates, while M&S Bank increased interest rates on very low-value loans of between £1,000 and £5,000 and on borrowings of more than £15,000.
However, Springol noted, “lenders only have to offer advertised rates to 51 percent of successful applicants.”
Unsecured personal loans are often a popular option for those looking to finance large purchases such as a new car or major home improvements, although comparison site MoneySupermarket cautions against using them for major structural businesses such as a conservatory or loft conversion.
“These jobs tend to take a lot of money and time, and a large enough unsecured loan may not be available,” said Joe Thornell of the site.
Boris Johnson and fiancee Carrie Symonds have spent up to £200,000 outfitting the flat above 11 Downing Street, according to reports.
Interest in home improvements and DIYs has boomed over the past 12 months as Brits have spent far more time stuck indoors during the pandemic and many have more money to fund.
Rachel Springol added: “Unsecured personal loans are an ideal option for consumers who want to know exactly how long they have before paying off their debt because they offer a simple fixed payment plan.”
And although they charge interest, it is unlikely that they will lead to the Election Commission investigating someone renovating their flat, which happened to Prime Minister Boris Johnson on Wednesday morning.
Joe Thornhill added: ‘When a home renovation is done right, few things are more satisfying. But when they get it wrong, they can be a major concern – just ask the Prime Minister.
He is accused of failing to disclose the fact that Tory money was initially used to pay for the renovation of his Downing Street flat, which he later vacated.
Personal loans from banks are often available in amounts of up to £25,000 and £1,000.
However, those who borrow small amounts may be better off with an interest-free credit card. They can make the purchase in advance on a card and then convert it into a 0 percent balance transfer deal and pay it out over up to 29 months.
Alternatively, they can get an interest-free purchase credit card for up to 20 months and pay it off without incurring any interest.
Before applying, potential borrowers can do simple searches to see how likely they are to accept a loan without a formal check that could damage their credit score, though it may not show the price they will have to pay in the end.
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