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High Interest Rates Hurting Consumers
Lenders have increased the interest rates in higher proportions than the increase in the base rate of interest in the past 14 months.
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January 23, 2008 (FPRC) -- The lenders in the UK loan market have increased the cost of borrowing by much larger volumes than the hike in the official interest rates.
According to the figures from price comparison website MoneyExpert.com, the average rates on personal loans have increased by more than the Bank of England base rate since November 2006. The base rate of interest as fixed by the Bank of England from time to time, presently stands at 5.5%, up from 5% 14 months ago. However, the typical loan rates have increased at a far faster rate, irrespective of the loan amount.
Consumers who want to borrow around £3,000 have been the hardest hit, with average interest rates increasing by 2.55% to 14.9% from 12.35%. Similarly, the borrowers looking for higher loans have also been hit by the increase in interest rates. Higher borrowing cost has adversely affected people's ability to repay their debts.
According to a YouGov poll of 2,000 people, one in 50 adults has failed to make a payment on a personal loan in the six months to 21 December 2007. Sean Gardner, chief executive at MoneyExpert, 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.” This explains the increasing popularity of debt consolidation loans. Gardner further said that people who wanted to take out a loan to consolidate their debts must be wary of the overall costs involved.
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