Interest Rates on Loans at Record High

Mon, 01 Dec 2008

New figures have shown that loan rates are at an all time high. Research from moneysupermarket.com found that the average interest rate on a personal loan is 8.46 per cent, despite the 1.5 per cent cut to the Bank of England base rate which now stands at 3 per cent. With borrowers now paying more than five per cent above the base rate, the gap between the average interest rate on a loan and the base rate has almost doubled in just two months.

Head of loans at moneysupermarket.com, Tom Moss, said, ‘Whilst personal loans are often seen as the ‘poor man' of everyday financial products, there is always a spike of activity post-Christmas and into the New Year when consumers take their finances in hand, and turn over that new leaf. Invariably this involves consolidation of store cards, credit cards and overdrafts ’.

Mr Moss also predicted that interest rates on loans could rise even higher following the Competition Commission’s recent recommendations on the sale of Payment Protection Insurance (PPI). Lenders often offset cheaper loan deals with PPI sales, though under the new proposals which would ban lenders from selling insurance products alongside loans, interest rates could rise once again.
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