Lenders’ rate hikes outpacing Bank Base Rate
Lenders are increasing the cost of borrowing money by amounts that far outstrip the Bank of England’s Base Rate rises, according to research from MoneyExpert.com.
The independent financial comparison website says that since November 2006, average loan rates have increased by more than the base rate across every single loan value threshold. The Base Rate has risen from 5% in November 2006 to 5.5% now.
And MoneyExpert.com says this has affected people’s ability to repay their loans.
New figures show that one in 50 adults – up to 926,000 people – have failed to make a payment on a personal loan in the six months to 21 December 2007 as their finances feel the strain of the rising cost of living.
People looking to borrow around £3,000 will be hardest hit, according to MoneyExpert.com. Its research shows that average rates on £3,000 loans have increased by a staggering 2.55% from 12.35% in November 2006 to 14.9% now.
And even borrowers looking for larger loans – typically more attractive customers for lenders – haven’t escaped the price hikes. The interest rate on a typical £12,500 advance will cost 1.6% more than it did just over a year ago, rising from an average 7.1% to 8.78% now.
Sean Gardner, chief executive of MoneyExpert.com, said: “With the cost of living on the increase, the obvious thing to do for anyone feeling the strain is to borrow money to tide themselves over.
“But people who want to take out a loan to consolidate debts or to make a large purchase must be wary of the overall cost. A set of monthly payments may seem manageable but you always end up repaying much more than you borrow. The golden rule is only borrow what you are certain you can afford to repay.”
MoneyExpert.com is warning that people classed as having poor credit records could suffer most – around 52% of searches on the independent website in the last three months for loans of under £5,000 were by people regarded as having adverse credit records.