It seems that UK banks have been rushing out credit card and consumer loan offers during the festive period with record low rates and cash incentives in order to take advantage of the mood.
It is a worrying development considering the announcement by the Bank of England that consumer credit has recently reached the highest level since the global financial crash that more and more cheap credit is becoming available.
Over the last couple of weeks at least three new cards have been launched offering 42 months interest-free credit for transferred balances.
In fact MBNA, recently acquired by Lloyds Banking Group for £1.9 billion, are now offering the longest interest-free deal of all at 43 months, though consumers are charged 3.29 per cent as a transfer fee.
The personal loan market is also getting in on the act, with Sainsbury’s Bank offering loans below 3 per cent for the first time. Personal loans between £7,500 and £19,999 will be offered at 2.9 per cent over 5 years.
January is known as a ‘bumper’ month for credit card balance transfers due to heavy spending over the festive period and consumers putting their finances in order for the new year ahead.
Governor of the Bank of England, Mark Carney, warned last month about the ‘vulnerabilities’ from ‘high and rising UK household indebtedness’.
He also said that the UK was starting to see for the first time ‘a releveraging of households’ as they run down their savings and borrow, driven by consumer credit.
‘We’re going to remain vigilant around these issues, though, because we have seen this shift,’ he added.