Personal Loan Rates Continue to Rise

Tue, 14 Apr 2009

New figures from financial comparison website Moneysupermarket.com have revealed that interest rates on personal loans are continuing to rise. The cheapest rates available on a personal loan of £7,000 currently average around 8.5 per cent – 8 per cent above the Bank of England base rate . That figure compares to an average interest rate of 6.9 per cent 12 months ago, despite the base rate being a lofty 5.25 per cent. Rates are expected to rise further before peaking at around 10 per cent by the summer. The rates apply to fixed rate loan deals, typically on 5 year agreements, though rates vary depending on the sum borrowed.

Head of savings at Moneysupermarket.com, Tim Moss, confirmed that interest rates are climbing on a daily basis. He cites the increased rates not only on the pressures of the credit crunch, but on the ban on selling payment protection insurance alongside loans – a previously lucrative source of income for banks – forcing lenders to return to their interest rates to secure a profit.

Mr Moss accepted that there are better deals being advertised by lenders, though these are reserved for borrowers with hefty deposits and excellent credit records.
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