When are Loan Rates guna b like 6% again

OMAR

My alliance and leicester one was 5.9% before I paid it off yesterday!!

OMAR

:money: :money: ??

mrcow

Are you (very lazily) trying to ask for ideas for a better deal on your Tesco loan?

If so, perhaps actually writing a proper question may help in the first place?

nomoneytoday

Type English - not text speak !!

Rafter

Unlikely for a long time, if ever due to the following:


1) Rates of 6% were only possible if >50% of customers bought the rip off PPI insurance that often doubled the effective rate of the loan. The enquiry and remedies proposed by the competition commission are likely to reduce both the price charged and numbers taking insurance significantly.

2) Rates of 6% when the borrowing cost for the banks was about 5% were only possible if less than 1% of customers didn't pay their loans back each year (ie bad debts). With loan loss rates running at 3% plus on average this looks unlikely too.

So banks have lost about 5% of their income on loans but the cost of money has also dropped by a couple of percent over 3-5 years, the average duration of a loan.

So hay presto 6% +5% - 2% = 9% which is roughly where the current best buys are.

If inflation drops below 2% soon though a 9% loan versus a 6% loan when inflation was 3.5% is about double the cost in real terms though.

This is more the market returning to some sort of sustainable level though - 6% loans were never profitable.

R.

enjoyincubus

Rafter wrote: »

Unlikely for a long time, if ever due to the following:


1) Rates of 6% were only possible if >50% of customers bought the rip off PPI insurance that often doubled the effective rate of the loan. The enquiry and remedies proposed by the competition commission are likely to reduce both the price charged and numbers taking insurance significantly.

2) Rates of 6% when the borrowing cost for the banks was about 5% were only possible if less than 1% of customers didn't pay their loans back each year (ie bad debts). With loan loss rates running at 3% plus on average this looks unlikely too.

So banks have lost about 5% of their income on loans but the cost of money has also dropped by a couple of percent over 3-5 years, the average duration of a loan.

So hay presto 6% +5% - 2% = 9% which is roughly where the current best buys are.

If inflation drops below 2% soon though a 9% loan versus a 6% loan when inflation was 3.5% is about double the cost in real terms though.

This is more the market returning to some sort of sustainable level though - 6% loans were never profitable.

R.

Exactly what Rafter said.

PPI was propping up unprofitable loans (i.e. the people who were low risk and never took insurance). The competition commission are about to end this one.

6% loans were marginally profitable if everything ran according to plan and the economic climate only improved over time.

You could argue stupidly low rate loans were part of the problem that got us to where we are today, but that one is for another discussion really...