Higher interests rates expected on unsecured loans

Unsecured loans will see higher interest rates as lenders lose the capacity to cross-subsidise loans with payment protection insurance, a finance website warns.

David Black, principal consultant of banking for Defaqto.com, said the pressure on payment protection insurance sales would affect lenders’ loan conditions.

The website compared the “average” deals for unsecured loans with the last time the Bank of England base rate was five per cent.

Mr Black remarked that there were more rejections in unsecured loan applicants as lending criteria were tightened.

He added that Nationwide were refusing about 60 per cent of applications and many lenders’ annual reports said they were focussing on acquiring better quality business.

The Bank of England’s monetary policy committee voted eight to one at its rate-setting meeting earlier this month to keep the base rate at five per cent.

David Blanchflower, the only committee member to call for a cut, suggested that the UK could parallel an earlier slowdown in the US unless the economy was boosted to offset the downturn in consumer spending and the housing market

© Adfero Ltd

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