The cost of borrowing has increased despite historically low base rates as Mortgage introducer reported yesterday.
We all know about the margins on mortgages but other areas of borrowing are suffering as well. Today the average rate on a credit card is 12.38% - giving credit card providers a margin over base rate of nearly 12%. The figures are only a little better for personal loans which have an average margin over base rate of more than 6%.
Louisa Parker, head of research and policy at the Money Advice Trust said: "The cost of borrowing… has remained entirely decoupled from the Bank of England base rate... This also means many consumers will have seen little or no benefit from the low base rate.
"In its report, the Bank of England says the increase in spreads is reflective of heightened credit risk, and uses an increase in personal insolvencies as evidence for this. However, we are concerned that the high cost of consumer credit can lead to a growth in over indebtedness.
At National Debtline we have seen a 44% rise in the number of calls received in the first six months of this year compared to two years ago.
"We would encourage lenders to place greater significance on the Bank of England base rate when pricing their products."
