A common question from both borrowers and lenders is whether UK law sets a maximum interest rate. The short answer is: there is no single, general cap on interest rates in England and Wales, but there are important specific controls, particularly for high-cost short-term lending and unfair credit relationships. Here is how it works.
No general usury cap
Unlike some countries, the UK does not have a general "usury" law fixing a maximum interest rate for all loans. In principle, parties are free to agree the interest rate. However, that freedom is constrained by several specific rules, especially where the borrower is a consumer.
The price cap on high-cost short-term credit
The most well-known control is the FCA price cap on high-cost short-term credit (the "payday loan" cap). For loans within scope, it limits:
- interest and fees to no more than 0.8% per day of the amount borrowed;
- default fees to a maximum of £15; and
- the total cost so that a borrower never repays more than 100% of the amount borrowed (i.e. you can never owe more than double what you borrowed in interest, fees and charges).
This cap protects consumers taking out short-term, high-cost loans.
The "unfair relationship" provisions
For regulated consumer credit more broadly, the Consumer Credit Act 1974 gives the courts power to reopen an "unfair relationship" between a lender and borrower (sections 140A–140B). If the relationship is unfair (for example, because the interest rate or terms are excessive or were imposed unfairly) the court can change the terms, reduce or cancel sums payable, and order repayments. So an extremely high rate can be challenged even without a fixed statutory ceiling.
You usually need to be FCA-authorised to lend to consumers
Separately, lending to consumers under regulated credit agreements is a regulated activity, you generally need FCA authorisation, and you must comply with FCA rules (including on affordability and fair treatment). Unauthorised consumer lending is a criminal offence and the agreement may be unenforceable.
Business-to-business loans
For genuine business-to-business loans (outside the consumer credit regime), there is more freedom to set the rate, but extremely onerous terms could still be challenged on other grounds (for example, as a penalty, or under general contract principles), and clarity in the agreement is essential.
Key takeaways
- There is no general maximum interest rate in the UK.
- High-cost short-term ("payday") loans are capped by the FCA: 0.8%/day, £15 default fee, and a 100% total-cost cap.
- The Consumer Credit Act 1974 lets courts reopen an unfair relationship, including excessive interest (ss 140A–140B).
- Lending to consumers generally needs FCA authorisation; B2B loans have more freedom but must still be fair and clear.
Sources
- FCA price cap on high-cost short-term credit (0.8%/day; £15 default fee; 100% total cost cap)
- Consumer Credit Act 1974, sections 140A–140B (unfair relationships)
- Financial Services and Markets Act 2000 (authorisation to carry on regulated consumer lending)
--- This article is general information about the law of England & Wales as at 2026, not legal advice. For advice on your circumstances, consult a qualified financial-services solicitor.