Rates on personal loans continue to increase
According to recently released reports the interest rates being charged on personal loans in the UK are continuing to rise despite the fact that the base interest rate has plummeted.
Over the past six months the base interest rate has fallen month on month, dropping to the lowest level in the history of the Bank of England, at just 0.5 percent. However, over the same period figures show that the interest rates being charged on personal loans have continued to increase.
Even borrowers that have an excellent credit rating and credit history are being charged an average rate of interest of 12.3 percent on personal loans, according to the data, which was compiled and released by Defaqto. This rate of interest is higher than the average rate of just 10.8 percent, which was being charged on personal loans for the same consumer group at the time when the base rate stool at 5 percent, last October.
Even the lowest rate personal loan, which the report claimed was from the Co-operative Bank, had increased from 7.6 percent to 7.8 percent, again for those with excellent credit ratings and histories.
One industry official said: ‘Lenders are under more funding pressures now and they are reluctant to lend to all but those with top credit scores.’
He added: ‘The imminent loss of payment protection insurance sales will also hit lenders’ profits so they are looking to stretch their margins.’
Another industry expert said: ‘This may all sound very negative, but there is no need to panic. Loan rates in general are not increasing as much as credit card rates and, unlike these variable rates, your loan rate will not rise as it is fixed for the length of your agreement. Other great deals on, for example, a £5,000 loan over three years include Sainsbury’s Finance (8.8%), Tesco Personal Finance (8.9%), Alliance & Leicester (8.9%) and Lombard Direct (9.4%), to name a few. You’re going to need an excellent credit file to get them – no missed credit card payments over the past six months – but they are nonetheless there for the taking.’
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