Rise in interest on credit cards reported

Despite the record low levels of the Bank of England base rate, unsecured loan charges have increased over the last three years. According to a new report by Defaqto, average interest rates on credit cards and unsecured lending such as personal loans have gone up since 2007, although the base rate has been falling to an all-time low during the same time period.

The research has found that from April 2007 to April 2010, the typical annual percentage rate (APR) on unsecured finance has risen to 12.9 per cent from 8.8 per cent. At the same time, the average rate for credit cards has increased to 18.2 per cent from 16.7 per cent.

The last three years has seen the Bank of England’s Monetary Policy Committee reduce the base rate from 5.25 per cent to 0.5 per cent, which is the lowest figure since the bank of was founded in 1694.

With the value of consumer credit lending in the UK standing at over GBP222 billion, Defaqto reported that the higher cost of unsecured borrowing reflected less appetite for risk among lenders who have already faced high levels of arrears and default rates during the economic downturn .