Rates on personal loans increase by 1%
Average rates on unsecured loans have increased by up to 1% in the past six months, despite the Bank of England cutting rates three times, according to price comparison site MoneyExpert.
Research from the website found that the average rate for a £5,000 loan is now 10.16% compared with 9.5% in November 2007. The average rate for a £7,500 loan has increased by 0.91% to 8.88%, compared with 7.97% in November 2007.
According to MoneyExpert, lenders are still offering deals for less than 7% but the rates on the most competitive deals have increased from 6.4% in November to around 6.9% now. Furthermore, around 1.38 million people have had a loan application turned down in the past six months as lenders have imposed tougher criteria when deciding who to lend to.
Sean Gardner, founder of MoneyExpert, said: “The Bank of England has a battle on its hands to restore confidence in the credit markets, when lenders react to three rate cuts amounting to 0.75%, by actually increasing rates. The unsecured loans market is almost mirroring the mortgage market where the issue is not so much rates but availability – whether or not lenders will let you have the cash.
“However it remains the case that creditworthy customers can still access competitive deals and borrowers should research the market carefully before making an application.”