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Friday 29th August 2008
It was announced yesterday that loan rates have reached their highest point for seven years, as lenders tighten their deals due to the pressure of the credit crunch – passing the risk of higher costs to their customers, rather than trying to solve the problem themselves. The average loan rate is now as high as it was in 2001 for the first time, highlighting the real problems the UK economy is facing today.
Since August 2006, the average loan rate on offer has increased by just less than three percentage points – from 8.1% to 11% today, marking the highest rate for unsecured loans since 2001. The steep rise may be due to the fact that over the last few years, the market for personal loans has been increasingly competitive as both lenders and borrowers cashed in on the availability of cheap credit. This competition therefore pushed prices down as lenders continually strived to outdo each other so that they could top the ‘best buy’ tables, therefore attracting more customers.
However, the tightening that has come as a part of the credit crunch may spell disaster for many customers, with Michelle Slade at Moneyfacts.co.uk saying that “This is extremely bad news for consumers who may be considering consolidating existing debts to try to drive down their monthly expenditure. At a time when every penny counts, if you need a personal loan, you need to make sure that you shop around as it is highly unlikely your bank will offer the best deal.”
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