Lenders stay well ahead of official interest rate rises

by Gill Montia

Story link: Lenders stay well ahead of official interest rate rises

MoneyExpert.com, the price comparison website, claims that lenders have been increasing the cost of borrowing well beyond the level of official interest rate rises.

The Bank of England’s base rate currently stands at 5.5%, up from 5% in November 2006.

However, during the 14 months period average rates on personal loans have increased by considerably more than 0.5%

Consumers wanting to borrow around £3,000 pounds will find that average rates have increased by 2.55%, to 14.9%.

Borrowers seeking larger loans are also being stung, with average rates on a £12,500 loan rising by 1.6%, to 8.78%.

The figures make disappointing reading for those struggling with personal debt and as Sean Gardner, chief executive of MoneyExpert.com, points out: “With the cost of living on the increase, the obvious thing to do for anyone feeling the strain is to borrow money to tide themselves over.”

Personal loan providers are unlikely to become more generous because the credit squeeze has forced them to review their lending criteria and focus on customers with sound credit histories.

All lenders are currently looking to their profit margins as business contracts and some firms, such as LV=, GE Money and Leeds Building Society, have withdrawn from the unsecured loans market altogether.

According to YouGov poll of 2,000 people, one in 50 adults failed to make a payment on a personal loan during the second-half of 2007.