Are UK banks milking UK customers?
A survey released today has confirmed the worst fears of many UK consumers with the average interest rate charged on an unsecured loan having risen from 8.71% to 12.27% over the last five years. This despite the fact that UK base rates have fallen to a historic low of 0.5% and appear set to remain relatively low for the foreseeable future. The profit margin of UK banks has increased from around 3.96% five years ago to an impressive 11.77% today.
While UK banks will argue that the risks of default have increased substantially, as borne out by the increase in bad debt write-offs, there is no doubt that UK banks are very adept at milking a situation for their benefit. Even though we have seen a significant increase in the number of loan operators in the UK it seems as though the only way is up at the moment in what could become something of a self fulfilling prophecy. As UK loan rates move higher, UK banks are forced to write off more bad debts, which then pushes UK rates yet higher, which pushes bad debts higher, etc.
Despite various promises by the UK authorities to clamp down on excessive profiteering from the UK banking sector there appears little that can be done in the short to medium term.
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