Personal loan rates rise

Thursday, 17 September 2009 07:58

There are fewer personal loans on the market and they are becoming more expensive.
 
Marks & Spencer Money, Egg and Alliance & Leicester have all increased their interest rates on personal loans since the start of September.
 
Meanwhile data from uSwitch.com show the number of products on the market has dropped to just 36 - a drop of 37 per cent in the last year.
 
The average loan rate has risen from 9.04 per cent to 9.08 per cent over the same period.
 
Marks and Spencer Money has upped selected personal loan rates by up to 1.2 per cent, Egg has increase its rates by one per cent to 14.9 per cent on loans of £3,000 to £20,000, while Alliance & Leicester has pushed rates to 8.9 per cent on loans £5,000 to £7,499 and to 8.7 per cent on loans from £7,500 to £15,000.
 
Lenders are quick to point out the pricing of personal loans are not dependent on the base rate - still at 0.5 per cent - but to a greater extent the risks involved in lending that have increased as the UK rides through the recession.
 
However, there have been claims lenders have also been taking advantage of lower rates to bolster their margins.
 
The top deals now seem to be held by the supermarkets.
 
Uswitch has also spotted the trend for existing customers and borrowers to be offered lower personal loan rates than new customers.
 
The best buy deal for new customers is 8.00 per cent at Tesco, but for existing customers it is 7.7 per cent at Nationwide.
 
Louise Bond, personal finance expert at uSwitch, said: "As consumers struggle to make ends meet and manage their finances, loan providers are looking to offer the best rates to those whose financial behaviour they can closely inspect - which are their existing customers."
 
She added the disappearance of personal loan deals from the market means more would-be borrowers were likely to be disappointed - especially the 1.3 million looking at loans for debt consolidation.
 
"However, for those that are thinking about, or attempting to do this, it would definitely be worthwhile finding out what rates existing providers can offer, as it seems loyalty is one of the only aspects that could win consumers better interest rates at the moment," Ms Bond added.
 
Best Buy table for existing unsecured personal loan customers
 

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