Cost of personal loans 'on the up'

28/11/2008

The cost of personal loans continues to rise, Moneysupermarket.com has said.

According to the financial website, the typical cost of an unsecured loan is around 8.46 per cent.

In September, it was 7.92 per cent.

However, the Bank of England has cut its lending rate by 200 basis points to three per cent - the lowest level since 1955 - over this time.
It is expected by analysts to reduce the rate again in December, perhaps to just two per cent.

Normally, lowering the Bank rate lowers personal loan rates.

However, the credit crunch has led to loan providers hoarding money to protect themselves against the financial crisis - making it more expensive to borrow as a consequence.

Tim Moss, head of loans at Moneysupermarket.com, said: "Loan costs are often overlooked in the frenzy of a base rate cut, when the focus is on the impact of any rate movement on mortgage payments and savings rates.

"What our calculations clearly show is that the cost of a personal loan is as apparently uncorrelated to base rate as mortgage rates are."

Tags; Debt Management and Banking, Credit Card Lifestyle,

• Share
• 
• 
• Store
• 
• Follow
•