Interest rates increased by lenders
A number of lenders have increased their personal loan rates since July, raising them by up to 12 times the increase in the Bank of England base rate, new research shows.
Around 32 loan providers have raised their rates since the base rate was increased by 0.25% in July, with lenders charging an average of 0.93% more, while some rates have gone up by as much as 3%, according to comparison website uSwitch.com.
The group said the interest charged on loans taken out by telephone or in a branch was rising at five times the rate as ones taken out online.
It said providers had increased their offline loan rates by an average of 1% since July, while online rates had risen by only 0.2% during the same period.
It went on to say the average rate for a loan taken out in a branch or by telephone was now 8.7%, compared with around 7.7% for online deals.
USwitch also warned that a number of banks were now operating so-called personal pricing on loan rates, under which they do not offer standard rates based on the amount people borrow but tailor rates according to people’s credit histories.
The group said this made it difficult for people to shop around to make sure they were getting the best deal as standard rates were not advertised in branches.
Mike Naylor, personal finance expert at uSwitch.com, said: “There are already huge variations in the loan rates available to consumers amongst both online and offline deals, throwing the personal pricing smoke screen into the melting pot is just causing further confusion, making it a complete minefield for consumers to shop around and get the best deal.
“It is far from transparent and a perfect way for the big banks to prey on loyal customers that trust their existing bank to provide them with a competitive deal.
“In effect, there is absolutely no way of the industry knowing which rates customers are getting from each provider, which could harm competition.”