Decline in Credit Card and Loan Providers Amid Rising Interest Rates

In the third quarter of 2024, the financial landscape for borrowers has become increasingly challenging, as the number of credit card providers in the UK has fallen to just 34, marking the lowest figure recorded by Moneyfacts since June 2006. This significant drop is detailed in the latest Moneyfacts UK Unsecured Lending Trends Treasury Report.

Similarly, the availability of unsecured loans has also diminished, with only 25 lenders currently offering these products, the fewest since April 2012. This reduction in options means that consumers seeking competitive rates for loans or credit cards are facing a more limited selection than ever before.

Rachel Springall, a Finance Expert at Moneyfacts, highlighted the impact of recent market withdrawals, stating, “Sainsbury’s Bank has exited the loans and credit card market, while Metro Bank has also ceased offering credit cards. This has resulted in the lowest number of credit card providers and loan providers we have seen in over a decade.”

In addition to the decrease in providers, interest rates for loans and credit cards have seen a slight uptick. The average purchase annual percentage rate (APR) for credit cards increased from 35.3% in June to 35.5% in September. Although there was a brief spike to 35.6% in August, borrowing costs remain higher than they were just a few months ago.

Over the past two years, interest rates have escalated significantly. For instance, the average credit card purchase APR was only 31.8% in September 2023 and 29.6% in September 2022, indicating a troubling trend for borrowers.

Unsecured loans have also become pricier, with the average APR for a £5,000 loan over three years rising from 11.7% in June to 11.9% in September. Despite these increases, borrowers might still find value in unsecured personal loans, especially those preferring a fixed repayment structure.

However, Springall cautioned that approximately 56% of the market is now comprised of loans that are only available to individuals with an existing relationship with the lender. This means that potential borrowers should carefully assess their eligibility for various loans before submitting applications, as options may be limited.