Loan rates at nine year high

Risk continues to be the focus in all lending activity, but with no guarantees on the debt being repaid, unsecured personal loans have seen some of the sharpest increases.

Despite bank base rate being at an all time low, personal loan rates stand at a nine year high. By comparison, when loan rates last peaked in 2001 bank base rate was 6.00%, its highest point in the last decade.

Michelle Slade, spokesperson for Moneyfacts.co.uk commented: "Unlike on a mortgage, there is no security that a personal loan debt will be repaid.

"In such a risk adverse market, lenders are only offering loans to the most creditworthy applicants and then at a premium.

"The post-Christmas loan sales that we see each January did not materialise, a further indication that lenders do not want to encourage unsecured lending.

"Unemployment remains high and when people are struggling to meet repayments, unsecured lending is one of the first debts they stop repaying.

"The majority of lenders advertise typical rates, so borrowers shouldn't be surprised if they have to pay a higher personal loan rate than that shown.

"With a £1,055 difference between the cheapest and most expensive £5,000 personal loan, shopping around is key.

"However, borrowers need to be wary of making multiple applications as this will reduce their chances of being accepted.