It may well be a New Year but some things don't change on the finance front.
It appears that quite a few lenders are now stinging us with much larger increases in the cost of borrowing than just the rises in the official interest rate.
Info from price comparison service MoneyExpert.com, shows that the average rates on personal loans have increased by more than the Bank of England base rate since November 2006.
The official interest rate currently stands at 5.5% but typical loan rates have risen at a far faster rate, irrespective of the loan amount involved. For example:
- Those of you that have been looking to borrow around £3,000 have been the hardest hit, with average rates rising by 2.55% from 12.35% to 14.9%.
- Those of you that had been looking for larger loans (typically making you more attractive to lenders!) have been hit too. Average rates on £12,500 loans have risen by 1.6% from 7.1% to 8.78%.
MoneyExpert have said that these increases have affected many of us and our ability to repay our debts:
1 in 50 of us has failed to make a payment on a personal loan in the six months to 21 December 2007, according to a YouGov poll.
Sean Gardner, 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 make a large purchase must be wary of the overall cost."
Esther James, at Moneyfacts, commented on this recent loan activity:
"For most of 2007 we reported rising loan rates, with the demise of sub-6% personal loans and the market finally settling at the end of the year with the best deals around 6.5% to 7%. "But as 2008 starts, there is good news for borrowers as rates begin to fall."
She said the drop could just be the normal seasonal fluctuation or a limited marketing drive, as many of us with a big burden of debt look to consolidate our borrowings, rather than the start of a more widespread trend across the loans market.
The global credit crunch, triggered by the US subprime crisis, has led to loan lenders getting much tougher and has led to them hiking up their rates and refusing increasing numbers of us applying for loans.
As a result of the credit crunch, some firms, such as LV= (Liverpool Victoria), GE Money and Leeds Building Society, have pulled out of the unsecured loans market entirely.
But if you have been looking for a loan, do not despair, as encouragingly, there are signs that personal loan rates are now starting to fall.
A small handful of lenders have recently cut selected rates by as much as 3%. These include:
- Britannia Building Society
So, even though the loans market is a bit tough to navigate, there are some good deals still available if you hunt around.(All rates quoted are correct at time of publication)
Financial first aid for 2008