Consumer loan rates 'on the up'

21/10/2008

Unsecured loan rates are on the up - despite the recent 0.5 per cent reduction to the base rate.

Figures from financial website uSwitch show that a total of ten personal loan providers have upped their rates, with Direct Line and Mint both raising some loan APRs by 4.8 per cent each this week.

The continuing freeze in the credit markets - on which banks loan money to each other - has been blamed for the rate hikes.

Financial firms have become much more risk averse due to the credit crunch and are therefore also much less likely to lend to borrowers with spotty credit records.

Louise Bond, personal finance manager at uSwitch, commented: "We have already seen eight loan providers increase their loan rates over the last four weeks, and now two more have followed suit. Both Direct Line and Mint have increased their loan rates…making borrowing even more costly."

Kevin Still, EuroDebt director, added: "Finding a loan to consolidate card debts is becoming more expensive and may act as a deterrent to consumers trying to start to repay their unsecured debts in a reasonable time period. Extended loan repayment periods just increase the amount of interest paid to these lenders.

"I think there needs to be a fundamental review of some of the ways that banks and predominantly US card issuers have interpreted Treating Customers Fairly (TCF) in very tough market conditions for consumers, who are bearing the brunt of the UK and US bank bailouts by paying at both ends through proposed tax increases and higher interest rates."

The Bank of England's base rate currently stands at 4.5 per cent.

Tags; Debt Management and Banking, Credit Card Lifestyle,

• Share
• 
• 
• Store
• 
• Follow
•