The Bank of England has raised interest rates by 5ppts to 4% – their highest level since October 2028.
The Bank’s Monetary Policy Committee made the move after voting seven-to-two in-favour of a rise as part of its continued efforts to stem inflation after the rate reached a 41-year-high of 11.1% in October.
News of the uplift comes as Auto Trader revealed that car buyers are turning to motor finance in greater numbers to fund vehicle purchases in the cost-of-living crisis, despite an average new car APR rate up from 5.1% in to 8.1% in the 12 months to January 2023.
Commercial Director Ian Plummer said: “Sizeable increases in new car APR averages, up from 5.1% in January 2022 to 8.1% 12 months later, have followed the recent spate of interest rate rises. And whilst the impact on used car rates haven’t been quite as sharp, they’re still on the up – increasing from 9.2% to 11.1% over the same period.
“As most drivers don’t have a choice about whether to stay on the road, and with post-COVID stock shortages keeping prices high, motorists are having to swallow extra costs.
“As a result, many are turning to car finance, with nearly two million finance interactions on our marketplace each month, which equates to 45 every minute.”
Auto Trader found that interactions with its finance calculators on used car adverts were up 42% increase on January 2019 levels and 11% up on January 2021 last month.
Used car APRs have seen less growth, than their new car equivalents, however, with an average 9.2% in January 2022 rising to 11.1% a year later.
The UK’s interest rate was lowered to a record low of 0.25% in 2016.
The BoE has now raised interest rate for a tenth consecutive meeting, however.
National Franchised Dealers Association (NFDA) chief executive Sue Robinson has previously raised concerns about the BoE’s decision to increase interest rates amid fears that it may slow car sales and the wider economy.
Vauxhall announced this week that it was launching a 0% interest rate as part of a new finance offer which included a home charge point for its electrified vehicles.