Loans are still difficult to come by for both individual and company clients, despite over £200bn pumped into the economy to encourage lending, in the government’s campaign of quantitative easing.
Interest rates on personal loans are now higher than they have been for 9 years, and the average loan rate to borrow £5,000 over three years is now 12.9%, according to finance research site Moneyfacts.
These costly loan interest rates remain high despite the historically low Bank of England base rate, which currently stands at 0.5%. This reflects the perceived high risk of lending, with default rates on loans spiralling in the recently turbulent economic climate, and demand for debt management services at a high.
Furthermore, three-quarters of banks are now lending only to their existing clients, and then only on a secured loan basis. The unsecured loan seems to be a thing of the past, for the moment at least.
Applicants for business loans are faring little better.
A new report from the Institute of Directors (IOD) reveals that 57% of companies who made loan applications were denied credit by their banks during 2009, and that 20% of business owners cancelled plans to apply for company borrowing, based on a conviction either that they would be refused, or offered credit at too expensive a rate.
