Loan Interest Rates Up 44 Per Cent In Two Years

Mon, 11 May 2009

The average interest rate on unsecured loan has soared by as much as 44 per cent over the past two years, despite record falls in the Bank of England base rate, new research has revealed.

A study by financial comparison website Moneyfacts found the average APR for a typical £5,000, three-year loan has jumped from 8.6 per cent May 2007 to a current 12.4 per cent - equal to a borrower paying an extra £293 in interest .

Loan customers have also seen a 13 per cent rise in the average interest rate on a £1,000 loan during the past two years, according to the study.

Michelle Slade, analyst at Moneyfacts, said: "Despite bank base rate being at an all time low, borrowers looking for a personal loan have seen no benefit."

"In May 2007 a customer would have paid £664 interest on a £5,000 loan over a three-year term where as today that has jumped to £957."

"Tighter lending criteria is likely to mean only those with a perfect credit history will be getting the best rates ."

Ms Slade blamed the significant increase on banks looking to reduce their exposure to defaulted unsecured loans as more customers fall into financial difficulties, such as redundancy, during the recession .

She also claimed that the rising likelihood of unemployment has reduced the number of low cost loans available to UK consumers, with 19 personal loan products withdrawn by lenders in the last twelve months.
add to favouritesnewsletterlink to this pagesend to friendpost comments

Link to this page

Copy and Paste the following HTML into your page.

Credit Crunch Savers
HSA Dental Plan
Get covered from £7.70 per month!
Amex Cash Back
Credit Card
Get 5% cash back on purchases with Amex
Income Protection Insurance
Get an instant quote with the award winning company