A recent report from Moneysupermarket.com shows that secured loan and personal unsecured loan rates have dropped back for the first time since August 2008 as a result of rivalry returning to the loan market.

The average annual percentage rate of the five leading loans peaked at 8.88% in March. This compares with an average rate of 7.34% in March last year. The average APR has decreased by 0.2% over the past week to 8.68%.

At long last competition seems to be returning to the secured loan and personal unsecured loan market which 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.

Despite the Bank of England having slashed the base rate over the past six months, loan rates for secured loans and unsecured loans had continued to climb. 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 secured loan or personal unsecured loan. Let's hope that the rate reductions we've seen recently are just the beginning and that we see more providers looking to attract new customers in the months ahead.

Lenders will need to continue reducing rates if they want to draw customers back, particularly those who want to reconsolidate their debt. At the moment, with rates above 8%, consolidating can be expensive.

Posted 21/04/2009 09:13:30