Derin Clark

Derin Clark

Online Reporter
Published: 11/06/2019

Second charge mortgages have increased by 24% in the first quarter of 2019, compared to the previous year, recent figures from the Finance & Leasing Association (FLA) show.

According to data released by the FLA, there were 25,243 new second charge mortgage agreements in the 12 months to April 2019, which was an increase of 14% year-on-year, while during the first quarter of 2019 there were 2,206 new agreements, which was a significant rise of 24% compared to the previous year.

Mortgage lenders are now offering loans from as little as £5,000 as competition in the market continues to heat up. Research by Moneyfacts.co.uk shows that 520 mortgage products now allow for either minimum loans of £5,000 or £10,000. Meanwhile, those at the other end of the spectrum requiring a loan of £1m or more have 111 products to choose from. The greatest number of products available is for those looking to borrow a minimum of £25,000, accounting for 42% of available products.

Borrowers are taking out larger loans to pay for home improvements compared to five years ago, according to recent figures from Sainsbury’s Bank.

The number of people taking out a personal loan from Sainsbury’s Bank to fund home improvements over the last five years has remained steady at however the average loan value increased to £12,374 in 2018, up from £9,352 in 2014. One reason for the increase in the average loan value could be due to the reduction in rates for higher value loans. According to Moneyfacts.co.uk data, in just five years, the average interest rate charged on a £15,000 loan has dropped by 2.0%, from 6.4% APR in June 2014 to 4.4% APR today.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Loan rates have plummeted over recent years, so much so that if borrowers applied for a loan of £15,000 back in 2009 with a fixed repayment term of five years, the average rate was 9.1% APR in June 2009, while in 2014 the average rate for the equivalent loan and term stood at 6.4% APR. Today, the average rate has dropped to 4.4 and rates as low as 2.9% APR are currently available. One of the many reasons to take out an unsecured personal loan is for home improvements, and this can be a cheaper and quicker process to receive funds than borrowing more on a mortgage.”

Summer is often the time homeowners look to carry out improvements on their homes and gardens, and a personal loan can be one way to help pay towards revamping their home. While personal loans can be a good way of funding DIY projects, it is essential that homeowners are confident they can repay the loan. Our loans calculator is an easy way to see how much you would need to pay each month on a loan. Borrowers should also note that the rates on offer are dependent on your credit rating and you may not always be offered the advertised APR.

Home improvements can be a great way of adding value to the price of property and can, therefore, be a worthwhile investment to make, however it is always important to ensure that a loan is affordable and can be repaid if circumstances take a turn for the worse.

Today there have been a number of notable changes to personal loan rates, with both reductions and increases seen across a number of brands. This includes Clydesdale and Yorkshire Banks, both of which increased rates but still remain highly competitive in the market, while Tesco Bank has reduced the rate in the £25,001 to £35,000 tier for one to five years, making borrowing at this level much more affordable.

First up, Clydesdale Bank increased the rate on its personal loan of £5,000 for a term of 36 months to 3.5% APR, which despite the increase still remains one of the most competitive short-term personal loans available and holds second place in our Best Buy personal loan chart for this tier. This same loan and rate is also available from Yorkshire Bank.

Another major change in the personal loans market today came from Tesco Bank, which reduced the rate on its £25,001 to £35,000 tier loan to 6.7% APR for a term of one to five years. This loan allows overpayments without incurring an early repayment charge, which may prove useful to borrowers who find they're able to pay more than they initially thought.

The personal loans market remains highly competitive all round at the moment, with the best deal available coming from M&S Bank offering a rate of 2.8% APR on a loan of £7,500 for 36 months. Meanwhile, Admiral is currently topping many of our personal loan Best Buy charts, including the £5,000 for three years chart with a rate of 3.4% APR, as well as our £7,500 for five years chart and £10,000 for five years charts with a rate of 2.9% APR on offer for both.

It's important to remember that rates will always depend on your
credit rating and personal circumstances, so make sure your credit score is up to scratch if you want to stand the best possible chance of securing the advertised rates.

What next?

Use our loan calculator to find the right deal for your needs.

Three in five (60%) of British borrowers admit that they are unaware of the interest rate being charged on their loan, research by Mintel has revealed. Given that 61% of adults owe money on a loan or credit product – credit cards (37%), current account overdrafts (16%) and personal loans (12%) being the most popular – this means a worrying number of people could be in the dark, and potentially paying over the odds in the process.

The research also showed that although 58% of consumers spent time trying to find the best deal possible when they took out their last unsecured loan, 48% of consumers said that it is more important to be accepted for the loan than the rate of interest charged.

This could prove to be a false economy, as a higher interest rate means higher repayments – which can have a significant impact on monthly budgets. It's of course vital to be as confident as possible that you'll be accepted for a loan, but the best way to do that is to ensure your credit rating is up to scratch.

You'll want to start by checking your score with a credit check provider – some, such as Experian, offer trials that allow you to access your credit report for free – and noting where any improvements can be made. Not only can this give you the best possible chance of being accepted for a loan, but the better your credit score the better your loan rate is likely to be, resulting in lower repayments in the process.

Find the best loan rate

Using online comparison charts such as the Moneyfacts.co.uk loan and credit card Best Buys often provide consumers with an easy way of shopping around and seeing what the best available rates are without commitment. According to the research carried out by Mintel, arranging loans online was more popular with consumers than using offline methods, with 56% of borrowers arranging their last loan online compared to the 40% who steered clear of the computer screen.

Sam Marks, financial services analyst at Mintel, said: "The fact that so many borrowers don't know the interest rate they're paying on their loan suggests that many Brits simply opt for the most convenient option, rather than shopping around. Half of consumers say they didn't consider other ways of borrowing when taking out their last personal loan, which suggests that many don't have the time to consider all of the options open to them.

"The market is still heavily reliant on cross-selling as most consumers resort to checking rates with their main current account provider. However, price comparison websites and the rise of soft-searches have given consumers a wider array of lenders to choose from and this has increased transparency in this market."

What next?

Find the right deal for you by using our loan calculator

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