Personal loans rate may rise

London (online-unsecured-loans) 27 Feb 2007: Market analysts believe that the loan industry may witness a rise in the interest rate on personal loans soon. The warning is made as a reaction to the repeated base rate rise carried by the Bank of England since August last year. Lenders are struggling to make profits out of unsecured lending and, hence, a rise in interest rate is exigent for them.

The Financial Regulatory Authority’s stringency on payment protection insurance (PPI), the major source of profit from many lenders, is also supposed to increase the necessity of raising the interest rate. It is found that PPI sometimes provides more profits than the actual loan itself.

The Bank of England raised interest rates from four and a half percent to four and three quarters in August last year. Another quarter of a percent was added to the interest rate in November last year, taking it to five percent. The month of January of the current year saw a further quarter of a percent rise that pushed the interest rate to five and a quarter percent. Experts are predicting another rise around the months in March or April.

Added to this, there is the financial authority’s stringency on the mis-selling of PPI. All these indicate that a rise in interest rate is on the card.  

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