Personal loan rate rocket as a result of credit crunch
According to recent reports the interest rates on many personal loan have rocketed recently as the result of the global credit crunch that was sparked in the United States and has started to take its toll in the UK and in other countries.
Reports suggest that personal loan rates have gone up by up to 4% in many cases, as a result of the repercussions from the turmoil that has hit the financial markets.
Interest rates have been raised by around nine lenders so far as a result of these problems. The interest rates have affected unsecured personal loans, with lenders taking increased risk from borrowers into account when raising these interest rates.
Amongst the lenders that have raised interest rates on their borrowing are the Bradford and Bingley, Goldfish, the Cheshire and Derbyshire Building Society, and the Norwich and Peterborough Building Society.
One industry professional 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."
Many of the lenders that have hiked up their rates have done so by up to 4%, making the cost of borrowing on an unsecured basis far more costly for the consumer.
Increased worries about the high risk of lending, coupled with higher inter-bank lending rates, has seen the cost of both loans and mortgages go up since the credit problems spread across to the UK.
According to one industry professional: "Lenders are already tightening their attitude to risk and hiking up rates for the riskier categories of lending."
Tom Smith
9th October 2007
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