|
Personal loan rates have increased by up to four per cent as the credit crunch and rising bad debts take their toll.
At least nine lenders have hiked rates on unsecured personal loans since the beginning of October, as lenders respond to volatility in capital markets and higher perceived risk among borrowers.
"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...," says Lisa Taylor, an analyst at price comparison service Moneyfacts.co.uk.
Bradford & Bingley (B&B) raised its loan rates by up to four per cent last Monday, giving a rate of 17.9 per cent on loans of between £2,000 and £2,950.
The Cheshire and Derbyshire building societies lifted theirs by up to three per cent, also to a maximum of 17.9 per cent on small sums borrowed.
Goldfish lifted its loan rates by up to one per cent last Tuesday, Norwich Union and RAC Financial Services pushed through the same increase a day earlier, while Eskimo Loans increased its rates by one per cent a week before.
Norwich & Peterborough Building Society raised its rates by up to 0.70 per cent last Monday, while Northern Rock - the bank left struggling to stay afloat in the wake of the global credit crunch - has also upped its loan rates, by 0.50 per cent.
Additional costs
The increases have added up to £300 to the cost of a £5,000 loan taken out over 36 months with B&B, and created a £500 gap between the cheapest and most expensive deals, according to Moneyfacts.
The credit squeeze that has sent the cost of money shooting up without the Bank of England lifting a finger has already seen mortgage lenders hike their rates.
Halifax, Britain's largest lender, and others including Abbey and Standard Life Bank increased some mortgage rates last month as problems in the US housing market spilled into the wider credit market, pushing up the London interbank offered rate - the rate at which banks lend to each other.
HBOS, which owns Halifax, said last week it would no longer set market share targets for net lending.
HBOS - whose one-fifth share of the UK mortgage market is more than double nearest rival, Abbey - has in recent years targeted a 15 to 20 per cent share, though its share slumped to eight per cent in the first half of 2007.
Louise Cuming, head of mortgages at price comparison site moneysupermarket.com, said the move to scrap targets could be the start of a more defined period of polarisation
|
