Warning over rising credit card and loan costs as interest rates set to rise again this week

The figures come more than a month after the Bank of England hiked the base rate to 1.75% - the biggest increase seen since 1995.

The central bank has increased the rate to help control rampant inflation which is currently sitting at 9.9%.

However, the cost of borrowing often rises when the base rate increases, as banks usually pass it on to customers.

In turn, this reduces people's disposable income, which in turn drives down demand, helping to slow any price rises.

But it means people will face higher rates if they need to borrow money.

How has the cost of personal loans increased?

Rachel Springall, finance expert at , said: "In the midst of a cost of living crisis there has been a rise in the cost of borrowing for new applicants on unsecured loans, with some average rates hitting their highest levels in over six years."

Several providers increased rates and the lowest rate for new customers stands at 3.1% compared to 2.8% in June 2022, she said.

"Lenders would typically keep this tier competitive as it is widely used as a representative APR, but we could see further rises to come if the potential risk for borrowers to default is elevated and lenders perhaps being more subdued with pricing competitively."

Individuals hoping to borrow £3,000 over the next three years face an average rate of 14.5%, compared to 14.3% this time last year.

Those wishing to borrow £5,000 over three years are facing an average rate of 7.7% compared to 7% a year earlier.

The average rate on a £7,500 loan tier now stands at 5.6%, compared to 4.4% in September 2021, and the highest since January 2016 when it was 5.7%.

And the average annual rate of interest on the £10,000 loan tier sits at 5.5%, versus4.5% last year.

The figures are average and take into account a variety of rates available, so you could still borrow at rates that are lower, or higher, depending on your circumstances.

How have credit card interest rates changed?

Rachel said: "Consumers who need to borrow over the short-term will find interest rates on credit cards rose during the third quarter of 2022."

The average rate across all types of credit card and including fees has hit a new high of 29.6%, she said

"Over the past quarter, the market witnessed a new high purchase card enter the arena from American Express, charging 439.9% APR, and this, coupled with interest rate rises from other providers, pushed the average APR to

The average annual rate of interest for credit cards right now has risen from 26% in September 2021 and 26.6% just last month.

Again the figures are average and take into account a variety of rates available, so you your rate could be higher or lower still.

Rachel also said: "Interest-free terms also fluctuated between June and September and both the 0% introductory terms for purchases and balance transfers fell slightly.

"One area that has worsened for borrowers is balance transfer fees, where the average stands at 1.99%, up from 1.95% in June."

Borrowers should carefully compare these upfront fees and the length of any 0% offer before committing to taking out a new credit card.

How can I reduce borrowing costs?

Rachel said: "As the cost of living rises it is vital consumers keep up with their repayments and switch deals if they are being charged interest if they can.

"It is wise consumers check their credit score before they make any applications for a loan or card and seek advice if they are struggling with their debts."