Borrowers may be paying higher interest rates on loans

According to a recent report borrowers in the UK may be paying far more for their borrowing than they should be, with some lenders hiking up their interest rates way beyond the rises that the Bank of England have applied to the base rate over the past year. Although the interest rate fell in December, there were five interest rate hikes between August 2006 and July 2007, which took the base rate to 5.75% before it came down to 5.5% in December.

Some lenders have been hiking up the rate over and above the rises in the base rate since November 2006 according to the report, with consumers seeing interest rate rises on borrowing exceeding interest rate rises in the base rate in many cases. The report also stated that those borrowing around £3000 would be most hard hit, with average rates rising by 2.5% since November 2006.

Borrowing large amounts of money usually means lower interest rates, but apparently even those borrowing larger amounts have been hit hard. One industry official stated: "With the cost of living on the increase, the obvious thing to do for anyone feeling the strain is to borrow money to tide themselves over. But people who want to take out a loan to consolidate debts or to make a large purchase must be wary of the overall cost."