Bank small loan interest 'reaches 10-year high'

23 May 2011

The interest rates charged by UK banks on small loans have escalated to their highest amount in more than ten years, it has been revealed.

According to financial information group, lenders and other providers are charging an average interest of 12.7 per cent on loans of £5,000.

This amount is up from the 8.6 per cent recorded prior to the financial downturn and is currently at its highest level since May 2000.

According to the group, the rising risk that people may default on the loans - with household finances remaining stretched - is to blame for the hike.

Michelle Slade of Moneyfacts said: "Most people's first port of call for a loan is their bank, but in most cases this is far from the cheapest option."

The UK's business secretary Vince Cable recently threatened the nation's banks with the prospect of higher taxes should they fail to significantly increase their lending to businesses.

By Tony Aynsley

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