Rates on the rise for personal loans

27/10/2009

Personal loan costs are on the up, despite the fact that the Bank of England lending rate is at an all-time low.

Moneyfacts.co.uk figures show that the typical rate for a £5,000 loan has risen to 12.4 per cent from 12.2 per cent in March.

Meanwhile, £10,000 and £25,000 loans have risen from 9.4 to 9.9 per cent, and from 9.5 to ten per cent, over the same period.

The Bank of England rate, at which personal loan providers themselves borrow, has stayed static at 0.5 per cent.

Commenting on the data, Michelle Slade at Moneyfacts.co.uk said that the credit crunch was ultimately to blame for the increase in loan rates.

"Unemployment continues to rise and lenders are worried that an increased proportion of their customers will default on their loan," she commented.

"It is highly likely that new customers are paying an increased premium to cover the defaulting customers who took out loans the previously more competitive rates."

Analysis from Moneyfacts.co.uk suggests that loan rates will continue to increase in future, as defaults rise and more people seek debt help.

Tags; Debt Management and Banking, Credit Card Lifestyle, Recent Graduate Debt,

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