Banks battle it out in personal loans market

Barclays announced it was offering a new rate of 6.9 per cent to current account customers who were borrowing between £15,001 and £25,000, the second lowest rate on offer behind Sainsbury’s Finance’s 6.8 per cent.

But within hours Nationwide Building Society launched a new rate of 6.7 per cent for people who have their main current account with the group, putting it straight at the top of the best buy tables.

The group is also offering a rate of 6.8 per cent for people who do not bank with it, although both deals will only be around until July 5, and are for loans of between £7,500 and £14,999.

There are now three providers offering loan rates of less than 7 per cent.

Competition in the personal loans market has been strong since the start of the year, when a flurry of lenders slashed their rates as they fought to attract borrowers who were consolidating debt.

Since the start of 2011, the average rate charged on a £10,000 personal loan taken out over five years has fallen from 9.74 per cent to 9 per cent, according to financial information group Moneyfacts.co.uk.