Loan rates come back down to earth
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It’s been a tough year for anyone wanting to a personal loan: banks have been scared to lend to each other, let alone anyone else. But as the crunch eases, are we returning to normality?
Since the onset of the credit crunch it’s become increasingly difficult to borrow money cheaply.
However, there’s been some good news in the past few weeks. Some new lower rates have been launched including a loan from The AA at 8.0%. What’s been happening?
The credit crunch and a clampdown on the sale of payment protection insurance (PPI) have had a significant impact on the loans market.
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Banks and building societies are much more cautious about who they will lend to than they were in the pre-credit crunch days, which has made it harder for many people to get a loan.
Some providers have pulled out of the market and stopped offering personal loans completely, which not only means less choice for borrowers, but also reduced competition among lenders.
What’s more, lenders are now more restricted in how they can sell PPI. With fewer PPI policies being sold, providers are looking for other ways to recoup the lost revenue.
All this has resulted in personal loan rates going up at a time when the country’s official interest rate has been falling. But in recent weeks we’ve seen a bit of an about turn, with a number of providers reducing loan rates or launching new, cheaper products – welcome relief for borrowers.
by Tim Moss, head of loans at moneysupermarket.com
