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Cheap loans 'are over'

By Sarah Engle, Wed 26 Aug 2009 - Published in Loans

Borrowers cannot rely on having access to cheap loans, an expert has suggested.

Pierre Williams, head of research at MoneyExpert.com, said that people can expect to be hit with a heavy premium when taking out a personal loan, despite the Bank of England's base interest rate sitting at 0.5 per cent.

"Rates are sky high with many of the banks building in a very healthy margin to insure against defaults, which remain a real possibility with unemployment creeping ever higher," he explained.

In addition, the expert suggested that some financial providers could be deliberately pricing themselves out of the personal loan market, in a bid to avoid supplying products which they view as risky.

Mr Williams also predicted that there will be no improvement in the cost of personal loans until banks are able to repair their balance sheets and employment begins to stablise.

Recent figures from moneysupermarket.com claimed that the average personal loan has annual interest of around ten per cent applied to it.