Savers cash in while loan customers lose out
While savers have managed to get a good deal out of Base Rate rises, personal loan customers are paying the price for banks’ lending mistakes, according to price comparison site Moneysupermarket.
Tim Moss, head of loans at the website, said that lenders have significantly hiked their rates in order to compensate for losses during the credit crunch.
“Lenders are ramping up their rates to claw back profits. For every happy saver in Britain, there is a now a ”Find out more” href=“http://yourmoney.com/news/2008/03/27/personal_loan_market_feels_the_pinch_/” target=”_blank”>disappointed borrower,” he said.
Research from Moneysupermarket found that the most competitive loans have risen from an average of 6.56% in September 2007 to 7.34%, despite the Base Rate having fallen by 0.50%. This means that the best loans currently offer rates of an average 2.09% above the Base rate, compared to 0.81% above the Base Rate in September 2007.
Kevin Mountford, head of savings and current accounts at Moneysupermarket, said: “Back in July, savers were barely getting any return above the Base Rate, but now they are consistently seeing rates of 1% or more above the Bank of England’s figure.
“Add to that, that the current accounts from Alliance & Leicester and Abbey are paying 8% or more, and savers have never had it so good. Banks know they need to increase their level of savings so they are now fighting for new customers.”