According to recent reports the PPI ban that has recently been announced by authorities will result in further spikes to loan rates, which many industry officials have said are already spiralling despite the all time low base interest rates, which stands at just 0.5 percent.

Reports show that when the base rate stood at 5 percent, just seven months ago, personal loans were available at 6.9 percent, which was a margin of 1.65 percent. However, although the base interest rate is now just 0.5 percent the same loan charges interest of 8.5 percent, which means an astonishing 8 percent margin.

Personal loan rates are expected to settle at around 10 percent by the summer according to some officials, partly because of the ban on PPI that has been announced and is due to come into force. As a result on the ban of single premium payment protection insurance, lenders could lose a lot of revenue, and officials believe that hiking up rates and charges are amongst the ways in which they will try and recoup some of these losses.

One industry official said: ‘Rates are going up on a daily basis. It’s the lenders’ reaction to the severe restrictions being introduced by regulators on the way payment protection insurance is sold. Instead of making profits on the back of this expensive insurance, they are going back to basics and having to make money out of lending you money.’

Lenders may still advertise reasonable rates, which is known as the typical APR, and is supposed to be available to at least two thirds of applicants. However, another recent report has suggested that far fewer than two thirds are getting this typical APR, with most finding that they are being charged much more, which is something that regulators are now looking into.

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