Personal Loan Interest Rates Reach Record High
Over the course of the last two months we have seen the Bank of England base rate of interest on loans and mortgages fall to a record low level of three percent, from five per cent only two months previously.
Many people with secured loans and homeowner loans have seen the monthly cost of their repayments reduce in line with these cuts, but sadly this is not the case when it comes to personal loans.
According to research conducted by Moneysupermarket.com, the cost of a personal loan has risen in comparison to the base rate by almost double in the last two months alone.
According to research, the average rate currently being charged on a personal loan now stands at 8.46 per cent, in excess of 5 per cent above the bank base rate.
Prior to the recent rate cuts, the difference between base rate and the typical personal loan rate was less than three per cent. As was reported last week, the Competition Commission (CC) is proposing to ban the sale of Payment Protection Insurance (PPI) Policies at the same time a loan is arranged, which will have the effect of reducing profit margins for loan companies and therefore pushing the cost of a personal loan up even further.
Around this time of year, just before and particularly just after Christmas, there is traditionally an increase in the number of individuals applying for personal loans, usually to be used for debt consolidation, in order to repay other loans and credit card bills which have increased over the Christmas period.
Moneysupermarket.com have warned borrowers to be careful when applying for a new personal loan, as in some cases the interest rate charged may actually be higher than that of the debts which are being repaid, although with some careful research it will still be possible to find some reasonably cheap loan deals.
