Lenders ‘running scared’ of credit crunch

Posted 2008-03-31

Consumers are facing higher interest rates on small, unsecured personal loans due to market jitters over the credit crunch, it has been suggested.

Financial website needanadviser.com said that lenders were responding to the bottleneck in global money markets by jacking up interest rates on some of their riskier products, such as unsecured loans.

"The trend is for lenders to put their rates up so it makes it worth while for them," said needanadviser.com director Jo Roberts. "This is all the result of the credit problems going on in the world at the moment."

The US sub-prime crash which ushered in the current credit crunch had its roots in irresponsible lending and Mr Roberts explained that lenders were now much warier about allowing people to overextend themselves.

She added, however, that not all financial products have been equally affected, emphasising: "We have not seen such a large [rate] rise in secured loans because lenders are now looking to get their money back."

Assessing the wider market, Ms Roberts concluded: "There is a lot of knee jerk reaction going on - but it will settle down. It always does."

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