Interest rates on small personal loans have shot up by 130% since 2006, according to information from Moneysupermarket, published by the Telegraph. Although the Bank of England base rate has been taken down to 0.5%, the average interest rate on a £3,000 loan is now 14.92%; a stark contrast to 2006, when the rate for the same loan amount stood at 6.49%, whilst the base rate was 4.5-5%.

Any borrower wishing to take out a £5,000 loan will see a similar increase; the rate has leapt from 5.83% to 10.84%. Average rates on a £10,000 loan have increased from 2.73% to 8.75%, whilst rates on a £15,000 loan have also seen a big jump; 5.79% to 9.08%

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Recent figures suggest that people in the UK are being forced to turn to payday loans and credit cards such as Vanquis in an attempt to keep themselves above water. This results in crippling interest rates that families will struggle to pay back. Credit firm Provident Financial receives 2,700 applications per day for its Vanquis card, according to the Mail Online.

The Telegraph recently revealed that one in five Britons have three or more credit cards, with 17% using one of their cards at least once a day. A quarter of the UK’s 30 million credit cards saw an increase in interest rate over the last year, with credit card debts of £2,000 now taking two years to clear if you pay back £100 a month.

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This morning Reuters revealed that mortgage approvals by British banks have increased by 37.8% from January last year. Although this initially appears positive, the UK has actually seen a record low for net lending. The Daily Mail has said that lending for January is the lowest for eight and a half years, with an end to stamp duty partly responsible.

December saw lending reach £10.92 billion, with people wanting to take advantage of the stamp duty threshold staying at £175,000 until the turn of the new decade. Now it has fallen back by £50,000, and activity has inevitably lessened.

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The number of people declared insolvent in England and Wales reached a record high in the third quarter of 2009, according to figures from the Insolvency Service.

There were 35,242 personal insolvencies, a increase of 28% on the same period last year, and a 6% rise on the previous quarter.

However, businesses fared better over the period, with 4,716 company liquidations, a 4.7% quarter-on-quarter fall. However, the number of businesses going bust between July and September was still 14.6% higher than the same period a year ago.

The recession has been fuelling the rise in personal insolvencies since 2007. There are a number of reasons for this. Increased unemployment has left more people unable to pay off outstanding debts, and the onset of the credit crunch meant that many banks limited the amount of cheap credit on offer. Therefore many people were unable to borrow their way out of immediate debt problems. The slow property market has also meant that people could not sell their homes and pay off outstanding debt with the equity.

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Nearly half of all UK savings accounts pay interest rates of 0.5%, new research by financial information service Moneyfacts reveals.

Of these accounts, nearly half pay 0.1% or less, as many providers have made dramatic rate cuts in recent months. Moneyfacts reported that one in 10 savings accounts have cut their savings rates since last March, although 3.5% increased rates.

Today the Bank of England kept the official Bank rate at 5% for the eighth month in a row.

Michelle Slade of Moneyfacts suggested that interest is very low on some savings accounts because banks chose to cut their rates ahead of new rules stipulating that providers must give two months’ notice before they cut interest rates.

“It is savers, such as pensioners, who rely on the income from their savings to supplement their income who end up worse off,” she said.

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The Bank of England is expected to expand its radical programme of printing money by a further £50 billion today as it steps up the fight against the deepest economic downturn in decades.

Whilst other countries have begun to emerge from the recession, recent figures revealed a 0.4% slump in the UK economy between July and September, leading experts to predict that Mervyn King, the Bank’s Governor and the rest of the Monetary Policy Committee (MPC) will extend the total size of its quantitative easing plan to £225 billion - the size of the entire Greek economy. This is the sixth quarterly contraction in a row.

“It is a lot of money, but if it does restart the economy and gets it moving again then it’s worth it,” said George Buckley, an economist at Deutsche Bank. “It’s very difficult to say if quantitative easing is working, but it is doing something.”

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Mortgage approvals rose to their highest level since March 2008 in September, the Bank of England has reported.

The number of mortgages approved for houses purchased rose by 3,000 in September to 56,000.
Non-mortgage borrowing by individuals shrank for the third consecutive month, representing the most sustained fall since records began in 1993.

Figures released by HM Revenue & Customs show a rise in house sales to 82,000 in September, double that of January.

“Lending activity has recovered in recent months, when compared to the start of the year, as buyers and sellers tentatively return to the market,” said Adrian Coles, of the Building Societies Association (BSA).

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Lenders will have to carry out rigorous checks on homebuyers’ monthly spending habits before issuing new mortgages, under new rules announced today by the UK’s financial regulator to clamp down on reckless lending.

Homebuyers will need to prove their ability to repay the loans, by providing details of their income, outgoings and any existing loans.

The Financial Services Authority (FSA) is also expected to ban self-regulation mortgages, where borrowers do not have to prove their income.

However, the FSA has stopped short of imposing caps on loan-to-value or loan-to-income mortgages, and a ban on 100% mortgages, deciding instead to crack down on risky lending.

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Plans to restrict the sale of the controversial payment protection insurance (PPI) have suffered a setback.

The Competition Appeal Tribunal has ordered the Competition Commission to reconsider whether a proposed ban on selling PPI alongside personal loans was appropriate.

The appeal against this restriction was made by Barclays bank, which argues that the proposed restriction on the sale of PPI limits customer choice.

PPI is designed to help cover the cost of bills and loan repayments in the event that you fall ill or are made redundant. The ban on its being sold in conjunction with the issue of a personal loan follows a two-year investigation into complaints over the high price and numerous exclusion clauses in the sale of PPI, which often aren’t properly clarified to the customer.

The Competition Commission said that it would study the appeal “closely”, but pointed out that if successful, it would affect just one part of its plan.

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A county court judge has told a lender that it cannot demand payment of an £8,000 debt, possibly paving the way for thousands of borrowers to default on repayments.

Judge Jacqueline Smart at South Shields county court has ruled that the MBNA credit card company cannot demand that a customer repay her debt. The company tried to force Lynne Thorius to repay the £8,000 she owed on her card.

However, Judge Smart decided that there had been an unfair relationship between MBNA and Ms Thorius because of the way in which the firm sold her payment protection insurance.

The credit card was sold to Ms Thorius in the official Sunderland Football Club shop in 2002, along with payment protection insurance, which is designed to cover debt repayments in case of illness or redundancy.

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