Loan rates increase as base rate falls
05/12/08
The difference in cost of getting a personal loan and interest rates figures has seen a substantial difference over the last two months. Despite the Bank of England cutting its base rate, loan companies have not passed this saving onto borrowers and the cost of getting a loan still faces high interest rates.
According to the website moneysupermarket.com, the average rate of interest of getting an unsecured loan was around 7.92% in September and is currently 8.46% despite a two per-cent cut in base rate in the last two months. Interest on loans has increased by around 0.3% in the past two weeks despite recent cuts in base rates.
“Loan costs are often overlooked in the frenzy of a base rate cut, when the focus is on the impact of any rate movement on mortgage payments and savings rates,” commented head of loans Tim Moss from moneysupermarket.com.
He continued, “What our calculations clearly show is that the cost of a personal loan is as apparently uncorrelated to base rate as mortgage rates are. The key difference though is that mortgages are priced according to Libor rather than base rate loan rates are not.”
