The cost of personal loans continues to fall

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Personal loans have fallen to their lowest rates yet, with one provider now offering an advance of £10,000 at just 3.3%.

At the turn of the year, the average rate on a £10,000 loan stood at 3.58%, down from 4.18% during 2014.

This fall equates to a saving of nearly £290 in interest over a five-year term.

Rates have been falling since 2011, when the average rate was 6.78%, and the experts at Moneysupermarket think that is a trend that will continue this year. M&S Bank cut its rate from 3.5% to 3.3% earlier this month.

“The current competition in the personal loans market is good news for consumers, who are being offered some of the best ever deals,” says Kevin Mountford, of Moneysupermarket.

“Rates have plummeted in recent years and we’re still continuing to see them fall this year.”

According to Moneyfacts, lenders are cutting rates within days of each other in order to beat their rivals in the best-buy charts.

As well as M&S, loan providers that have slashed their rates since the turn of the year include the AA, Cahoot, Clydesdale Bank, HSBC, Nationwide, Natwest, Royal Bank of Scotland, Sainsbury’s Bank, Santander, Tesco Bank, TSB and Yorkshire Bank.

A change in the Bank of England base could see the trend start to reverse, but the indications from the Bank’s governor are that this is not likely to happen any time soon.