Recent figures have shown that since the start of this year the cost of personal loans has been increased by banks, and this is despite the fact that the base interest rate has been at an all time low of just 0.5 percent for the past nine months. Since the start of this year the cost of a best buy loan for £5000 is said to have increased by around 1.54 percent to 10.78 percent according to reports.

The increase in the loan rates since the start of this year means that borrowers will end up paying more each month for their loan or will have to take it out over a longer period to keep repayments down.

Industry experts have said that whilst the base rate has fallen dramatically over the past twelve months, and has been at an all time low for the last nine months, this has yet to feed through to the personal loans market.

They have also said that there is a lack of supply with personal loans, as banks as being far more choosy over who they will give loans out to. Recent research suggested that around d eight out of nine banks were now only offering personal loans to existing customers, such as those that have current accounts, rather than to opening their loan products up to those that are not already customers.

The British Banker’s Association said: “The UK economy has changed considerably since the credit crunch began and it is still changing. Lenders price their loans according to the economic factors of the time, and although there is still aggressive competition for customers, there are also harsh economic realities they have to deal with. They still have to fund their loans using a mix of wholesale money and customers’ deposits, and neither of these options is open to them at anything like the Bank of England’s base rate.”

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