BORROWERS are facing a rise in costs, with some loan rates hitting their highest in six years.It comes just days before the Bank of England is expected to hike the base rate again and for the seventh consecutive time.
3The cost of borrowing is predicted to rise even further before the year is outCredit: PA:Press Association
3The average annual rate of interest for loans of £7,500 have reached a six year high
3Credit card APR’s have reached record highs in September 2022
Financial specialists at MoneyFacts have released new data on the cost of credit cards and unsecured personal loans in their Unsecured Lending Trends Treasury Report.
The figures come more than a month after the Bank of England hiked the base rate to 1.75% – the biggest increase seen since 1995.
The central bank has increased the rate to help control rampant inflation which is currently sitting at 9.9%.
However, the cost of borrowing often rises when the base rate increases, as banks usually pass it on to customers.
In turn, this reduces people’s disposable income, which in turn drives down demand, helping to slow any price rises.
But it means people will face higher rates if they need to borrow money.
How has the cost of personal loans increased?
Rachel Springall, finance expert at Moneyfacts, said: “In the midst of a cost of living crisis there has been a rise in the cost of borrowing for new applicants on unsecured loans, with some average rates hitting their highest levels in over six years.”
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Several providers increased rates and the lowest rate for new customers stands at 3.1% compared to 2.8% in June 2022, she said.
“Lenders would typically keep this tier competitive as it is widely used as a representative APR, but we could see further rises to come if the potential risk for borrowers to default is elevated and lenders perhaps being more subdued with pricing competitively.”
Individuals hoping to borrow £3,000 over the next three years face an average rate of 14.5%, compared to 14.3% this time last year.
Those wishing to borrow £5,000 over three years are facing an average rate of 7.7% compared to 7% a ye …