While lenders have faced strong pressure from the government to lower their mortgage rates in line with Bank of England interest cuts, many customers taking out personal loans have been shocked to find their variable rates have been increasing – while some existing borrowers have also seen rates hiked.

As the number of borrowers struggling with repayments increases, Sarah Routledge investigates rising interest rates on personal loans.

The cost of an unsecured personal loan has jumped, in some cases by 3.4 per cent, in just 18 months, according to Moneyfacts.co.uk.

The comparison site found smaller loans have seen the biggest increases, with the average rate on a £1,000 loan today standing at 19.8 per cent, while the average rate on a £5,000 loan has jumped to 12 per cent.

Read more: Don't get caught in a personal loan trap

Fines totalling £22.7 million have been imposed on financial providers who mis-sell products such as pensions, mortgages and payment protection insurance (PPI). Just under 50 fines, ranging from £4,000 to £7 million were levied in 2008.

The number and value of penalties has risen dramatically on the previous year, when 23 errant firms were charged £5.3 million.

Alliance & Leicester received the largest fine, with financial heavyweights Credit Suisse, GE Money Lending, Liverpool Victoria and Egg also being punished.

Penalties for PPI mis-selling accounted for the largest single proportion of fines, more than £10 million. See the Which? PPI mis-selling campaign page for more information.

Source: WHICH!

SOME of Britain’s biggest high-street banks have pulled out of the market for single premium payment protection insurance (PPI), ahead of an expected curb on its sale by the Competition Commission.

Despite warnings that it could result in more expensive loans, the Commission is expected to outlaw the sale of single premium policies when it announces its final proposals to clean up PPI sales in the next couple of weeks.

Pre-empting a ban, Alliance & Leicester, Barclays, The Co-operative Bank, Lloyds Banking Group, which includes Lloyds TSB, Halifax and Bank of Scotland, and RBS/Natwest have announced that they will stop selling single premium PPI with unsecured personal loans by the end of this month.

The move was welcomed by Jon Pain, managing director of retail markets at the Financial Services Authority, the City regulator. He said: “We are pleased these firms have stopped selling single premium policies and would expect other firms to notice these developments and review their own positions. A PPI product can be helpful for customers wanting protection on a specific credit agreement as long as the policy is sold appropriately.”

Read more: Barclays and others Dump the sale of Single Premium Payment Protection

As a fellow complainee, it has been noted recently that Barclays Firstplus, have been dragging it’s feet in responding to complaints from its customers.  They have been stretching the complaints process to the outer limits of its time schedules.

It is clear that FIRSTPLUS have no interest in fairness to its customers, and despite the mass of complaints it is failing to see that maybe these cases actually have merit, they are still using the age old excuse that when a broker is involved in the transaction, it is the responsibility of the broker for the sale of the loan and policy, yet FIRSTPLUS fail to respond to the fact, and go on to avoid the requested clarifications as to why it states on the policy documentation that FIRSTPLUS are acting as the intermediary and advertise that they are either a member of the FSA or were members of the General Insurance Standards Council.

Read more: Barclays Firstplus Dragging its Feet on Complaints