Subscribe!PPI crackdown could push prime loan rates into double figures
Speculation has increased that best-buy loan rates could hit double figures before the end of the year if a crackdown on payment protection insurance (PPI) goes ahead as planned.
Currently the best rates for unsecured personal loans start at just under 6%, but rates have been rising in recent weeks following the Bank of England’s three bank rate rises since August (see our related story here).
Financial data specialists Moneyfacts warned that a clampdown on lenders selling PPI with their loans products could see rates rise to at least 10%.
Margins on personal loans are notoriously low and lenders struggle to make a profit on the main product. Instead, they make their money on the lucrative insurance policies they sell along with the loans.
Moneyfacts personal finance analyst Michelle Slade said: “With the Office of Fair Trading due to review PPI later this year, if lenders are forced to lower the cost of their PPI cover and revert to a ‘pay as you go’ type policy rather than a single premium, we could potentially see best buy loan interest rates reaching double figures before the end of 2007.”
Many of the best loan deals have disappeared since the beginning of the year. Northern Rock, for example, has increased its rate from 5.8% to 6.5%.
Slade added: “Our research shows that on a loan of £5,000 over three years, only four providers now offer rates below 6%, with more than 40% of the market charging in excess of 8%, and 16% charge over 10%.
With a difference of 14.8% APR between the most and least competitive rates, shopping around for the best deal is an absolute must.”
It makes sense to act now if you are thinking about taking out a loan and grab a good deal whilst lenders are still offering low rate loans. A great starting point is to get The Loan Helper to search the market for you to find the best deal available. With a panel of 16 top UK lenders on hand and hundreds of different loan deals available between them, The Loan Helper is ideally placed to secure the best possible rate for your loan now before lenders are forced to increase them. The Loan Helper offers a free personalised secured loan quotation service with no obligation, so request yours now here.