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.
New plans have just been announced by the Government
DON'T assume your landlord covers you
Incl £2ish sun cream & £1.50 disposable BBQs