Lenders raise rates over financial uncertainty

As financial uncertainty in the market grows, a host of loans providers have raised their rates over the past two weeks.

Financial analyst Moneyfacts reports that a total of nine providers have pushed up their rates.

Bradford & Bingley increased it's APR on small loans between 2,000 and 3,000 to 17.9%, a jump of 4%. For loans between 5,000 and 7,500, it raised its rates by 3.2%, up to 9.9%.

Beleaguered bank Northern Rock has increased its typical APR to 7.9% for unsecured loans between 1,000 and 25,00.

Cheshire have increased their personal loan rate by 3% to 9.9% which applies to loans of between 5,000 and 7,450.

In the early part of Summer it was possible to get a loans for around 6%, but banks and building societies are beginning to take a far more cautious approach to lending.

A number of industry experts suggest loans will continue to get more expensive well into 2008.

Rates on loans have been increasing steadily since the Bank of England started hiking its Base Rate. Since August 2006, the Base Rate has risen from 4.5% a year to 5.75%.

Further pressures on lenders have come about due to the US subprime mortgage crisis which has resulted in falling property prices, a slowdown in the US economy, and billions in losses by US banks.

The crisis has sent shockwaves through some of the biggest financial institutions in the world. In the UK, the of majority financial institutions have some involvement in sub-prime lending and banks and other lenders are cutting back on how much credit they will make available and are looking more closely at applications for personal loans.

Lenders are also concerned about the outcome of the Competition Commission investigation into payment protection insurance (PPI). It is estimated that banks could lose as much as 4 billion a year if the Competition Commission cracks down heavily on the selling of PPI. It is due to release its recommendations in early 2008.