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Significant jump in loan interest rates is a concern

It has been revealed by a Moneyfacts survey that UK loan rates have risen substantially over the last 12 months despite the fact that UK base rates have fallen dramatically. Just 12 months ago a £5000 loan would have attracted an interest rate of 8.6% although this has now risen to 12.4%, an increase of over 40%. A chicken and egg situation has now emerged, as more and more people default on their loans it seems that interest rates will go higher, ensuring further defaults, and even higher rates in the future.

This vicious circle of interest rate rises is set to hit many in the UK with the economy still in the doldrums and the cost of living still relatively expensive. There are serious concerns that while liquidity may well be there in the consumer market, interest rates are literally pricing many people out of such moves. Whether we will see a reduction in rates in the short term, as and when the UK economy recovers, remains to be seen as many financial institutions across the country seem adamant they will "milk" the interest rate differential for as long as possible.

While there are a variety of introductory rates available in the UK loan market you may well have to delve deep to find these!

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