Interest rates on loans hit record high

Interest rates on small personal loans hit a record high last month as unsecured borrowing costs remained elevated. The typical interest rate charged to people borrowing £5,000 jumped a massive 2.2 per cent during the month to hit 15.58 per cent, the biggest monthly change recorded and the highest rate since the Bank of England began collecting the data in 2005.

Credit card rates also increased, rising to 16.73 per cent, from 16.66 per cent while overdraft rates were at a near record 19.08 per cent. The financial information group Moneyfacts attributed the steep rise to the fact that lenders were focusing on the market for larger advances.

Banks and building societies typically offer their best rates to people borrowing higher sums, and it is not unusual to see 20.9 per cent charged to people wanting only £5,000.