Lenders cut APR on loans

Moneysupermarket.com has revealed that the average interest rate of loans dropped last week for the first time since August 2008.

The average annual percentage rate (APR) of leading loan providers hit a high of 8.88% in March, compared to 7.34% in March 2008.

The peak came despite repeated cuts to the Bank of England’s base rate to an all time low of 0.5%.

However, last week the average APR on loans finally capitulated to the pressure of low base rates and fell 0.2 percentage points to 8.68%.

Tim Moss, moneysupermarket.com head of loans and debt said this fall in rates is ‘great news’ for consumers.

“A number of providers have reduced loan rates or launched new, cheaper products, in recent weeks - welcome relief to borrowers,” Moss said.

Despite the APR cuts, Moss believes banks will continue to be cautious when it comes to issuing loans.

He said: “Banks and building societies are more cautious about who they’ll lend to than in pre-credit crunch days, which has made it much harder for consumers to get loans.

“And the clampdown on the sale of payment protection insurance (PPI) has caused providers to hike up prices to recoup lost revenue.

“As a result is has become increasingly difficult to get a competitively priced loan.”

Moss added that lenders will have to reduce rates further if they want to attract more borrowers.

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