Borrowing costs rise despite base rate cuts | Money | guardian.co.uk
The cost of borrowing £1,000 through a personal loan has risen by 4.5% since last March, as the credit crunch has forced lenders to increase interest rates, latest figures show.
The statistics from financial information provider Moneyfacts show the average APRs on unsecured loans of all sizes have risen since March 2007, even though the two recent cuts in the Bank of England base rate have brought it back down to the same level it stood at a year ago.
Those taking out the smallest loans have been hardest hit, with the average APR on a £1,000 loan increasing from 14.4% to 18.9%.
The average APR on a £2,000 loan has increased by 3.9% to 17.9%, while a £3,000 loan now attracts a rate of 15.5% - 3.8% higher than March last year.
Borrowers taking out larger loans are also paying more than those who did so last March, although the gap between rates isn't as large.
On a £5,000 loan average rates have risen 2.1% to 10.1%, while on a £25,000 loan they are 1.2% higher at 8.1%.
"Anyone looking to take out a loan in 2008 is going to find themselves faced with having to shell out more by way of monthly repayments than they would have done over the last couple of years," said Michelle Slade, a Moneyfacts analyst.
Tags: Personal Loans
March 11 (Bloomberg) -- U.K. banks raised the cost of borrowing for homebuyers with the smallest deposits to a seven- year high, declining to pass on two interest-rate cuts by the Bank of England.
The average rate offered by lenders on loans for 95 percent of the price of a property, fixed for 24 months, rose to 6.55 percent, the highest since September 2000, the central bank said today on its Web site. The cost fell for mortgages worth 75 percent of the value of a home.
Banks have been reassessing the credit risk of their loan books after reporting losses and writedowns totaling almost $190 billion stemming from the collapse of the U.S. subprime mortgage market. Today's data suggest that lenders are making it harder for consumers buying their first property, who typically have smaller savings to invest, to afford a home.
``Banks are clearly now engaged in more active risk- pricing,'' George Buckley, chief U.K. economist at Deutsche Bank AG in London, said in a note. ``Riskier borrowers are failing to benefit from the fall in policy rate expectations.''
While the Bank of England cut the benchmark interest rate twice since December to 5.25 percent, banks have been reluctant to pass on the reductions in full. They have also curbed the number of loans on offer, with mortgage approvals in January staying close to the lowest in nine years.
Tags: Home Loan Advice
March 10 (Bloomberg) -- Northern Rock Plc, nationalized by the U.K. government last month, will stop selling subprime mortgages in Britain.
The bank will stop selling the loans today, though applications submitted before will be processed, the Newcastle, England-based lender said in a statement today.
Northern Rock, bailed out by the Bank of England after it ran out of funds for new loans in September, began selling subprime and ``near prime'' home loans last year on behalf of Southern Pacific Mortgage Ltd., which was responsible for funding the loans and managing the repayments, it said.
Bloomberg.com: U.K. & Ireland
Northern Rock Pulls Out of Subprime Mortgage Market in U.K.
Tags: Mortgages
