Interest rates on unsecured loans could rocket by end of the year

In light of recent prediction from financial experts and industry professionals, anyone that is thinking of taking out an unsecured personal loan in the UK this year may want to act fast, as many now think that the fixed rate on this type of loan could rocket by the end of the year.

The hike in interest rate rises on unsecured personal loans, which generally offer a fixed rate throughout the term of the loan, has been predicted as a result of the recent interest rate rises enforced by the Bank of England, which took the base rate from four and a half percent before last August to five and a quarter percent by this January.

Further speculation about additional rises in interest rates is also fuelling predication with regards to rocketing interest rates on unsecured loans. According to officials from Moneyfacts the interest rates on unsecured loans could go as high as ten percent – and perhaps even higher – by the end of the year, which means that those taking out a personal loan will be stuck with a high interest rate and a higher monthly repayment for the term of the loan.

Another factor that could potentially affect the rise of interest rates in personal unsecured loans according to experts is the ongoing crackdown on PPI, which has been at the centre of controversy recently.

A spokesperson from Moneyfacts said: 'With the Office of Fair Trading due to review PPI later this year, if lenders are forced to lower the cost of their PPI cover and revert to a 'pay as you go' type policy rather than a single premium, we could potentially see best buy loan interest rates reaching double figures before the end of 2007.'

Tom Smith
10.04.07

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