Small Loan Rates Double in Four Years

Tue, 06 Apr 2010

Leading offers on personal loans of £5,000 or less are now twice as expensive as they were four years ago, according to new research from price comparison website moneysupermarket.com. The research revealed that the top ten deals on a loan of £5,000 are now accompanied by an average interest rate of 10.84 per cent, up by 86 per cent on the 5.83 per cent four years ago. Similarly, borrowers wanting a personal loan of £3,000 are now faced with a top ten average rate of 14.92 per cent, compared with interest rates of around 6.49 per cent in 2006 – an increase of 130 per cent.

Head of loans and debt at moneysupermarket.com, Tim Moss, said the figures confirmed that banks and lenders now appear less willing to chase market share in the unsecured loans market. The increase is all the more remarkable when considered alongside the significantly lower base rate today compared with four years ago. Having hovered at around 5 per cent in 2006, the Bank of England has since cut that rate to 0.5 per cent.

In addition to the caution which has accompanied the economic downturn, the ban on selling payment protection insurance has been cited as another reason for the increase.
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