- 07
- Mar
Banks are continuing to raise interest rates on personal loans by as much as 4%. Moves by the banks to increase loan rates lend more evidence to the claim that the credit crunch has finally begun to hit consumers.
So far nine major lenders have increased charges on new loans in the past fortnight. The decision by banks to increase their rates is a direct reflection of the fact that borrowing for banks on the international money market has gone up considerably in the past two months.
However not all the rises can be blamed on the credit crunch and it would appear that many of the banks that have increased their charges are also attempting to increase their profit margins on loans. This reflects the more cautious approach that banks are now taking to lending in the wake of the sub-prime mortgage crises that hit the US housing market.
Home loans have also followed a similar path with some rates beginning to go up as well as the introduction of much tighter lending criteria.
Many banks are trying to now make up for the massive losses that they have sustained over the past few months and most banks are now reluctant to lend to each other. This inability of banks to secure a ready source of money has led to interest rates being driven up among inter-bank lending. This increasing in borrower costs that banks have sustained is now being passed onto lenders.
However, all is not bleak for consumers seeking cheap loans. There are still bargains on the market for those prepared to shop around, especially for homeowners with good credit records.
