moneysupermarket.com: cahoot's flexible loan rate hike of 5.5%

Stuart Glendinning, managing director at moneysupermarket.com, comments on cahoot’s flexible loan rate hike of 5.5 per cent:

“This rise – from 9.4 per cent to 14.9 per cent – is hefty. Indeed, one of the downsides of flexible loans is exactly this – the provider can up the rate at any time.

“Most personal loans are fixed rate and offer protection against sudden rate increases and this move from cahoot serves as a useful reminder people should read the small print before taking up any financial product.

“Existing customers faced with this sharp rate rise can of course shop around for a new loan – though very few providers offer comparable flexible rate products. In the fixed rate market, cahoot’s parent company, Abbey, currently offers the most competitive typical loan rate available, at 5.8 per cent. In fairness to cahoot it is encouraging this in its customer communications.

“However, feedback from a survey of more than 11,000 loan applicants using moneysupermarket.com’s loans service and published as part of the loans comparison tables indicates less than half (48 per cent) of people applying for the Abbey loan were offered the ‘typical’ rate of 5.8 per cent, with a further 45 per cent benefiting from rates between six and 9.9 per cent.

“The fact cahoot is encouraging its customers to switch to the lower rate Abbey loan suggests this move is less about extending margins and more about switching people away from the cahoot brand. This suggests Abbey is laying the groundwork for killing off the cahoot brand altogether.”