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The Rock raises its rates

Stricken high street lender Northern Rock has been branded the worst offender in the pool of banks that have raised their unsecured lending interest rates over the past few weeks.

A number of banks have been raising interest rates on unsecured loans as a result of the credit crunch and turmoil that has hit the UK's financial markets. The Rock has had to cope with additional problems following the chaos that ensued when it was discovered that the Bank of England had bailed out the lender.

The 6.2% interest rate charged on Northern Rock's unsecured loans put it towards the top of the best buy tables some months ago. However, since then the Rock has been raising its rates, and the interest rate now stands at 8.9%. This has resulted in the lender being branded one of the worst offenders amongst those that have raised their interest rates on unsecured loans.

One loan expert stated: 'Basically, everyone is moving their rates up. The personal loans market hasn't seen anything like this for almost a year and suddenly things have changed considerably over the past three weeks. Lenders finally realised they had to make some margins in the business. They spent quite some time lending out to risky borrowers and now they have to change to make up for those lending decisions made years ago.'

He added: 'Now they have to only start taking on quality people, which they have been doing already, and they also have to start charging existing customers more.'

Some lenders, such as Barclays, are offering financial incentives to tempt customers to switch loan providers, but experts state that consumes should check the small print before signing up to one of these.

Tom Smith
20th October 2007

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