Small Loan Interest Rates Reach Record High

Thu, 03 Dec 2009

Interest rates on small loans rose to a record high in October, according to new figures from the Bank of England .

The average interest rate charged on a £5,000 personal loan increased from 13.35 per cent in September to 13.52 per cent, the highest level on record.

Rates also climbed on £10,000 loans, from an average of 10.45 per cent to 10.96 per cent - the highest figure recorded since August 2002.

According to financial information website Moneyfacts.co.uk, HBOS increased rates on its loans by up to 3.5 per cent, while other smaller lenders also made changes.

Moneyfacts spokesman Darren Cook said: "The HBOS group put rates up by 3.5 per cent during the month. This is a considerable increase."

"Other players also raised their rates. As the possibility of defaults increases, they are looking at their risk and pricing accordingly."

The Bank of England revealed interest rates on other forms of unsecured borrowing also remained high during October, with UK lenders charging average interest of 15.86 per cent on credit cards .
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