With the bank of England base rate remained unchanged again for the 23rd consecutive month, numerous people are bewildered as to why the rates for all types of loans and finance have in fact been more expensive over the last couple of years than they have been for a long time. There are a number of reasons for this, and the following article should help you understand what they are.

Lack of competition

Since the credit crunch and the issues resulting from lump sum Payment Protection Insurance (PPI), there are now less loan companies in the market place. PPI miss-selling has resulted in a massive problem for the UK Homeowner Secured Personal Loansindustry, as a majority of of lenders were let’s say not professional in their approach to selling this insurance policy. They failed to explain the product they were selling and in most cases led the applicant to believe that the payment protection insurance was compulsary. Also for the Homeowner Secured Personal Loans industry a great many lenders sold their PPI insurance as a one off payment that covered the applicant for the first 5 years of their loan. Because this premium was usually added to the loan amount and therefore the applicant was paying interest on the premium for the term of the loan (up to 25 years). The government amended the law concerning the sale of this type of insurance which left the loan companies open to court action, not only on new sales of this product but also on historical sales. This opened the flood gates and in a great many cases the lenders were being forced to repay the cost and any interest that had been charged on the premium. Because of this a great many lenders were forced out of business.

Unstable economy

Because of the financial uncertainty of the economy the small amount loan companies that are still in the market are concerned that they will be unable to get their money back. This uncertainty has influenced them to change their prospective and re-evaluate their lending criteria and also their their interest rates in order to negate their exposure. This two-pronged philosophy meant that they will not lend to as many people, and the ones that do qualify are being forced to pay higher rates.

Will we see low rate loans return to the market?

It is seemingly looking like the the market is picking up again, with a number of new lenders looking at coming into the market, and the new 7.9% headline rate already introduced by “Link Loans”. As more players get involved in bidding for your business that will probably do a couple of things, according to where the new loan companies want to position themselves. Firstly it could possibly result in a rate war where the main benefactors will be the applicants as they see the rates reduced. Another likelihood is that the loan companies may have to become more forgiving with their criteria, in order to get hold of their quota of loans. This will help to make it easier for those of us that have experienced financial problems in the past to secure the poor credit Homeowner Secured Personal Loans we need to help get back onto an even keel.