Loans ‘still not at normal levels’

20 October 2008

Banks’ continued reluctance to lend to each other has seriously restricted the level at which personal loans, mortgages and other forms of credit can be offered, according to the BBC’s business editor Robert Peston.

The LIBOR (London Inter-Bank Offered Rate) is the average rate at which banks lend to one another at any given time. On Wednesday the ‘three-month sterling’ LIBOR stood at 6.21% – almost 2% higher than the 4.5% base rate – indicating that the Bank of England’s base rate cut, aimed at encouraging more and cheaper loans to consumers, hasn’t had the expected impact.

A spokesperson for Think Money said: “Although some loan rates came down following the Bank of England’s base rate announcement, particularly on mortgages, a number of lenders chose not to follow suit.

“That said, interest rates on loans are still lower than they have been in previous decades, when interest rates were regularly above 10%.

“There are also still plenty of loans available – but not as many as in recent years, and it may take a little longer for borrowers to find the right deal.”

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Tags: loans, personal loans, loan rates, mortgages, libor, libor rates

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