Level of borrowing on personal loans decreasing
September 5, 2008
Recently released figures have indicated that the level of borrowing on personal loans has been falling, as funding for both mortgages and unsecured loans continues to dry up. Officials from the price comparison service uswitch.com claim that the ongoing financial crisis in the UK’s money markets is now affecting unsecured personal loans, with fewer people able or willing to take out this type of finance.
A report has recently been released by the company indicated that over the past year the level of unsecured personal loans being taken out by consumers has fallen each quarter by over 39,000. An official from the firm said that the data showed that both personal loan borrowing and mortgage borrowing was falling day by day, as the effects of the global credit crunch continue to grip the financial markets.
He said: “our research has confirmed that both mortgage lending and unsecured loans are drying up by the day.”
The rising interest rates on personals loans have been partly blamed for a drop in unsecured borrowing, with lenders thought to have pushed up borrowing interest rates by an average 1.3% over the past year, even though the base interest rate has fallen by 0.75% in the same period. Consumers are unwilling to take on the higher rate loans in the current financial climate according to officials.
However, there are also other factors that have been blamed for the fall in personal loan take up, with tighter credit conditions being the other main contributory factor. Officials have said that some consumers that may have wanted to take out a personal loan can no longer do so because of the tighter credit conditions stemming from the credit squeeze.
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