Lower interest on loans indicates market may be recovering

The loans market may be recovering, it has been claimed, after a major loan provider reduced the interest rates it charges on personal loans.

Nationwide is now offering personal loans at 7.7% APR, leading Tim Moss, head of loans at moneysupermarket.com, to say: "Loan rates have been going up since the start of the credit crunch - in April 2008 best buy loans were around 7.34 per cent, but have now risen to closer to 9 per cent."

He went on to say that Nationwide`s cut in interest rates is the first suggestion that the worst in the loan market may be over.

"This is an indication of green shoots in the loans market and if others follow suit there will be a big shift in the cost of borrowing for consumers. As unsecured loans are the riskiest of all lending for banks, a movement such as this to gain market share is great news for consumers."

A spokesperson for Think Money commented: "It is encouraging to see interest rates on loans being lowered. Even so, although this may suggest the loans market is recovering, individuals should still be particularly careful when taking on any form of debt during a downturn."