Unsecured lending has risen, study reveals
05/05/2010
A study of unsecured loans has found that UK consumers are being charged higher rates than they were three years ago, despite a fall in the Bank of England base rate to a record low of 0.5 per cent.
The research by independent financial research firm Defaqto showed that during this period, the average interest charged has risen from 8.8 per cent to 12.9 per cent.
Insight analyst for banking at the firm Kevin Bray remarked: "The increasing cost of unsecured lending reflects the lack of appetite for risk in this area with many providers suffering from high arrears and default rates."
He added that the number of providers has dropped since 2007, with those still in the market mainly concentrating on selling products to existing customers.
While the cost of taking on debt has risen, the consolidation of existing borrowing is becoming a less prominent reason for taking out a loan, according to recent research.
Sainsbury's Finance found that only £1 in every £50 of loan borrowing taken out last year was for consolidation purposes, compared with £1 in £13 in 2007.
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