Northern Rock emerged today as the worst offender among a raft of banks that have ratcheted up their unsecured loan rates over the past three weeks.
Today the beleaguered bank increased its typical APR to 8.9% for unsecured loans in an effort to cope with the added risk affecting all banks following the recent credit crunch.
This is the highest interest rate seen on an unsecured loan in the UK for over two years and exemplifies Northern Rock's troubles of late. It was top of the best loan tables three months ago with a rate of 6.2%, but has been raising this gradually, culminating in a previous high of 7.9% last week. Tim Moss,head of loans at moneysupermarket.com, said: 'Basically, everyone is moving their rates up. The personal loans market
hasn't seen anything like this for almost a year and suddenly things have changed considerably over the past three weeks.
'Lenders finally realised they had to make some margins in the business. They spent quite some time lending out to risky borrowers and now they have to change to make up for those lending decisions made years ago.
'Now they have to only start taking on quality people, which they have been doing already, and they also have to start charging existing customers more.' Your Personal Loan, the newly launched brand from Co-op Bank, currently offers the nation's cheapest unsecured personal loan with a typical APR of 6.3%, along with Moneyback Bank, which also charges 6.3%.
Following closely behind is Alliance & Leicester with 6.5%; HBOS and Tesco follow behind that, both with a rate of 6.6%.
Barclays recently initiated a £50 incentive for people top swap loans from existing banks, but customers should check the small print before doing so, according to Moss.
Northern Rock's shares rallied today by 34% to their highest in three weeks on the back of hopes that hedge fund manager Jon Wood will make a bid after raising his stake in the bank to more than 4%.
Source : thisismoney.co.uk |
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