The cautious lending strategy being employed by banks is making it increasingly hard for consumers to get personal loans, according to new research by moneysupermarket.com.
The comparison website said figures from the British Bankers’ Association showed that borrowing through personal loans had dropped by 28 per cent this year.
However, moneysupermarket.com said that searches for loans made through its website were actually 20 per cent higher, suggesting the fall in lending is being driven by a lack of supply and not a lack of demand.
Although the financial crisis has eased over the past couple of months, the figures appear to show that personal lending remains tight. Customers are now left with a narrower choice of lending providers.
Of those banks that are lending three-quarters of these are restricting personal loans to existing customers, the research shows.
Seven out of the top nine banks that are most active in the
personal loan market will only advance money to people who already hold products with them, typically current account customers.
Barclays reserves its best rates for existing customers and accepts very few loan applications from non-customers, leaving only
Alliance & Leicester fully open to business for new customers.
The cost of personal loans has also edged higher. The current average of the top 10 loans of £5,000 is 10 per cent, up from 8.5 per cent in January.
Non-bank lenders such as Tesco currently offer the most competitive rates, but their lending criteria are among the strictest.
The Bank of England announced earlier this month that non-mortgage or credit card lending fell by £0.7 billion in October.
“It’s quite clear that the fall in this kind of lending is almost entirely down to a lack of supply,” said Tim Moss, head of loans and debt at moneysupermarket.com
“We’ve also seen the average rates for personal loans increase across the board, so consumers who are lucky enough to be accepted for a loan have to pay more too.”
Tesco, Sainsbury Bank, Alliance & Leicester and Abbey all offer loans of £5,000 with an 8.8 annual percentage rate (APR). On £7,500 loans, HSBC and Barclays offer 8.7 and 10.9 per cent respectively.
Mr Moss concedes that customers will face difficulty in securing one.
“The most important thing to remember is that the APRs quoted by lenders are ‘typical’ and the rate you see may not be the rate you’re accepted at,” said Moss.
“So pay special attention to the deal you are offered to ensure you get the best product for you.”
