Loan cost increasing following base rate cut

The recent 2.5 per cent cut in the base rate has resulted in the disappearance of sub-eight per cent interest loans for borrowers, research has revealed.

According to uSwitch.com, there are now no loans with interest under eight per cent annual percentage rate (APR) available on the market, despite 23 per cent of all loans carrying interest below this figure two months ago.

The price comparison site states that the lowest rate available is now 8.2 per cent, with the average being 9.44 per cent – a jump of 0.13 per cent on figures from October.

Lousie Bond, personal finance manager at uSwitch.com, explained that this may have a negative effect on those seeking to carry out debt consolidation.

“We have already seen six loan providers increasing rates over the last month by as much as two per cent,” she explained, adding that this is “bad news” for borrowers.

The credit crunch has resulted in as many as 6.1 million people in the UK spending all their savings in order to survive in the current financial climate, research by Axa has revealed.

By Tom Musk