From atop a five year high it seems personal loans have no place to go but down. Research indicates that competition has returned to the market, with the average interest rate on loans of £5,000 or more falling as banks and building societies regain their appetite to lend.
However, eight out of the top 10 providers surveyed now use what they call ‘personal pricing’, varying the interest they charge according to the borrower's credit rating.
Tim Moss, head of loans and debt at moneysupermarket.com, the website which undertook the study, said: 'Whilst other products linked to bank lending have maintained some correlation with the base rate, personal loans have not, and consumers have had to endure artificially high rates for quite some time.
'We are now seeing some movement from lenders as their appetite to attract new customers increases and this can only be seen as good news for consumers.
'The steady rise in personal loan rates over the last few years really is evidence of providers' unwillingness to take on any risk when lending to consumers.
'However, as rates begin to drop and competition returns to the market, we can expect to see some more inventive propositions entering the marketplace.'