| It appears that banks are pushing up the cost of | | | | credit cards and overdrafts. |
| personal loans to help boost their profit margins, | | | | A number of mortgage packages have been |
| despite a decision by the Bank of England to cut the | | | | removed from the market, whilst the cost of a fixed |
| base rate on three occasions. | | | | rate deal rose sharply. |
| The interest rate on a loan of £5000 was up on | | | | Interest rates on credit cards have been increased |
| average by 0.71 of a percentage point to 10.16 per | | | | by banks, with spending limits cut and annual fees |
| cent, whilst the rate on a loan of £7,500 had | | | | introduced. In some cases people have had their |
| risen by almost a full point to 8.88 per cent. This was | | | | cards withdrawn. |
| in direct conflict with a fall of 0.75 of a percentage | | | | Interest rates on overdrafts have also soared |
| point in the base rate to 5 per cent. | | | | despite the cuts in the official base rate. |
| This increasing gap between the official interest rate | | | | With the shortage of credit influencing a drop in the |
| and the one millions of struggling consumers in the UK | | | | property market and a fall in high street sales, city |
| are faced with, has allowed banks to push up their | | | | analysts warn that this could send the UK spiralling |
| profit margins. | | | | into a recession. |
| Data shows that despite the Bank of England's | | | | A study by personal finance analyst website |
| attempts to steady the economy in uncertain times | | | | MoneyExpert.com, found that interest rates on some |
| through base rate cuts, they are failing as high street | | | | personal loans were becoming far too expensive to |
| banks effectively set their own interest rate policies, | | | | manage. They discovered the highest rate on a loan |
| independent of the recommendations from experts | | | | of £5000 was 29.9 per cent with Citi Financial |
| on the Bank's Monetary Policy Committee (MPC). | | | | Loan, with other lenders charging anywhere between |
| The reckless lending in the US housing market has | | | | 13.4 per cent and 16.9 per cent. |
| left the UK's financial companies looking at ways to | | | | The best rates were found with Your Personal Loan |
| gather in more money from British consumers in an | | | | who offered a rate of 6.9 per cent for borrowing |
| attempt to fund the expected huge losses they | | | | £5000. |
| could face. | | | | Chief executive of MoneyExpert.com, Sean Gardner |
| This approach has meant that banks are becoming | | | | said, "The Bank of England has a battle on its hands |
| stricter with who they are prepared to lend money | | | | to restore confidence in the credit markets when |
| to, with an estimated 1.38 million loan applicants being | | | | lenders react to three rate cuts totalling 0.75 of a |
| declined in the first months of 2008. | | | | point by actually increasing rates. The unsecured loans |
| This policy is expected to leave millions of people in | | | | market is almost mirroring the mortgage market |
| real financial trouble, trying to manage debt | | | | where the issue is not so much rates but availability; |
| repayments and other bills such as mortgages, food | | | | whether or not lenders will let you have the cash." |
| costs and rising fuel prices. | | | | Leading debt counselling services have reported a |
| The credit crunch has also been seen to be having an | | | | sharp rise in the number of seemingly wealthy middle |
| effect on the cost and availability of mortgages, | | | | class families in Britain seeking financial assistance. |