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8 October 2007
The recent turmoil that has hit the UK's financial markets resulting from the credit crunch that was sparked in the sub-prime sector of the United States has resulted in a number of lenders pushing up interest rates on their unsecured personal loans, with some increasing rates by as much as four percent.
Borrowers will find that the cost of taking out a personal unsecured loan has rocketed as a result of increased stringency from lenders and increased inter-bank lending fees stemming from the chaos that has affected the finance industry over recent weeks.
In the past couple of weeks around ten lenders are thought to have increased the interest rates charged on their unsecured personal loans.
The Bradford & Bingley has reportedly added four percent onto the interest rate charged on some of its loan products. Volatile financial markets and increased fear over potential defaults from borrowers – particularly in light of increased mortgage repayments as a result of higher interest rates – have partly fuelled the decision to increase rates state experts.
One financial analyst stated: "With increasing uncertainty in the financial markets, rising levels of bad debt and a year of interest rate rises putting pressure on our disposable incomes, it comes as no surprise to see lenders increasing their lending margins."
Other lenders that have raised their interest rates on unsecured loans include Goldfish, the Cheshire and Derbyshire Building Society, the Norwich and Peterborough Building Society, and a number of others.
The interest rate now being charged on personal loans of between £2000 and £2950 from the Bradford & Bingley now comes in at 17.9% following the 4% increase.
A number of lenders have also been raising the interest rates on their secured loan products as a result of the financial turmoil, making it increasingly difficult for those looking to switch to a better mortgage loan deal to find something that offers competitive rates of interest.
One industry professional stated: "Lenders are already tightening their attitude to risk and hiking up rates for the riskier categories of lending."
As a result of these interest rate rises on both secured and unsecured loans it has become all the more important for consumers to shop around and compare interest rates before committing any loan, as the differences in interest rates charged is greater than ever following the massive increases applied by some lenders.
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