Unsecured loans | Bank of England highlights rising cost of unsecured loans

Interest on unsecured loans to UK banks and building societies are much higher than before the financial crisis, despite the collapse of public funding, the Bank of England said today.
Far from lenders pass on the benefits of cheaper financing to their customers, shows a study by the bank that people would not expect to use with security, pay interest at 11%, although the rate of the Bank is currently 0.5%.
A report by the Bank Quarterly Bulletin revealed that the gap between bank and unsecured loans have increased since the beginning of the credit crunch as financial institutions sought to reduce risks and increase profitability.
Before financial markets froze in August 2007 represents a strong competition between lenders, the interest rate on an unsecured loan of 10 000 8%, a difference of 2.5% over the average bank.
"During the recent financial crisis, the discount rate has been reduced, but in general the interest rates on new loans to households are not many and even some increased interest costs are covered," said the bank.
She added that the guaranteed interest rate for loans with a normal mortgage loan secured by the property 'was rejected by about two percentage points to 4%, less than half the decline of five points in the bank.
Today's report is the intense debate over the availability of credit to finance economic recovery add in the UK. The last Labour government nationalized the banks targets for lending to home buyers and businesses, while Vince Cable, the secretary, criticized the lender in case of choking the supply of finance.
The banks say that the problem of lack of customer demand is more than an inadequate supply.
Bank no final conclusion on his research. He said the extension of the interest rate can increase the cost of borrowing to act to slow demand. But high retained profits for lenders that would allow them to provide more capital.
"Is a high level of capital in the banking sector to strengthen financial stability desirable during the process of building capital levels are not disproportionate to restrict the supply of credit to households and businesses," said the bank.
"We're building a level of capital in the banking sector reduces the probability that lenders standard and reduces the loss to creditors when the creditors are not."
The article in the Quarterly Bulletin said that the decoupling of the rate of new loans from the bank rate since the financial crisis seemed to be determined by two factors. paid first, the price that banks and building societies in the wholesale market, money markets funds had increased. But a part of the increase in interest rates due to higher margins on loans and advances by the lender, which may build on a need for a bigger budget.