UK Consumers Set For Certain Rise In Loan Costs

Fri, 09 Nov 2007

The UK is being braced for a certain increase in loan rates as the global credit crunch continues to affect the UK loan market.

Five UK loan providers have signalled their intention to withdraw from the market as credit continues to become scarcer following the summer's sub-prime credit crisis.

The shortage of credit, which has been the main factor behind the recent hike in loan rates by as much as 4 per cent, has meant that it is highly likely that loans will continue to get more expensive into 2008.

Liverpool Victoria, as of yesterday, stopped selling unsecured personal loans, following on from the announcement earlier this week that GE Money is withdrawing its competitive rate of 6.9 per cent on loans between £7,500 and £25,000. Leeds Building Society followed suit by withdrawing its competitive rate at the end of last week.

Making up the five loan providers are SPPL, LoanOne and Money Partners, who have all withdrawn their respective ranges in the unsecured loans market.

Bob Sturges from Money Partners said: "This decision was against our wishes. The credit crunch hit us a double whammy; it became harder to find funds, which meant we had to raise rates, which meant people were less interested in borrowing ."

"And it didn't get any better as time went on – we simply weren't able to secure new lines of funding . We have nowhere to go; we're disappointed and frustrated," he added.

Lisa Taylor from price comparison website Moneyfacts.co.uk said that the number of withdrawals from the market is 'highly unusual'.

She added that the fall of such a range of different providers with varying degrees of competitiveness is a signal of how much of an impact the credit crisis has had on the markets.
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