Banks Increase loan rates to 12%
New research from Moneynet.co.uk has shown that the loan rate from banks has risen from 8.71% to 12.27% in the past five years whilst the base rate has dropped to its lowest ever recorded level.
This means that with the base rate at 0.5% compared with 4.75% 5 years ago, the banks profit margins have gone up from 3.96% to an unbelievable 11.77%.
Banks are now being far more cautious who they lend to and research has shown that people looking for smaller loans, of around £5000 will find it much harder than those looking to borrow more. Market leading deals are being offered but mainly to customers with an existing relationship.
One reason why the banks may be charging more for those seeking personal loans could be due to the difficulty they have now have selling PPI. The insurance was a money spinner for the banks and helped boost their profit margins. Customers are now free to seek alternative standalone PPI and therefore the banks are looking to raise their profits elsewhere, namely by charging more for the actual loan.
Tim Moss, had of loans and debt at Moneysupermarket said “the clampdown on the sale of PPI has caused providers to hike up prices to recoup lost revenue. As a result it has become increasingly difficult to get a competitively priced loan”.
