According to money facts, the credit card interest rates and bank loan rates in UK have reached the highest over the last 9 years. The average credit card rates has risen to 18.8 per cent this February and the personal loan rate is at an average of 12.4 per cent which has almost doubled from 2007 . Financial experts say that the hike in interest rates by banks and credit card companies are attributed to the fear of losses incurred due to defaults.
Bad debt write off
Bank of England figures shows a huge rise in the number of bad debt write offs. The bad debt write off has doubled to £1.6bn in the third quarter of 2009, which has also alleviated the fear the banks are facing now. Unemployment has raised significantly such that the UK households are troubled to repay the debts. With more job losses to be seen and people cutting back on their spending, the rates may remain high.
VAT and shopping blues
With sales at 0.7 percent low in January, BRC (British Retail Consortium) reports attributed the decrease in sales to higher VAT and snow storms. The cost of living has raised to 2.9 per cent in December and Inflation to 3.5 per cent in January. This hike is due to the rise in VAT(Value Added Tax) from 15 per cent and 17 per cent.
Government vs Credit card companies
Pressure building on the credit companies, government doubts that some credit card lenders could change the interest rates on existing debts. To overcome that government has proposals to stop card firms from changing interest rates on existing debts and to increase the minimum amount to be paid off each month.
Insolvencies
Recession has driven households to insolvencies, mortgages and personal loans are eating them out. Official figures from the Insolvency Service recorded 134,142 records last year and experts expect that to rise to over 150,000 this year.
About the author
Nid Alex- author is working in a Payday loans lending company in UK as financial consultant. Interested in writing articles on UK finance, quick loan options, fast payday loans, money till payday etc. visit: http://www.ukquickloans.co.uk
