Interest rates on personal loans are continuing to rise as lenders remain worried about borrowers keeping up with their repayments.

The rates from Marks & Spencer, Egg, and Tesco have all recently risen by 1.2%, 1% and 0.2% respectively. Twelve months ago, the typical interest on a three year loan for £5,000 loan was 11.2% whereas today it is 12.2%.

Rates have risen because lenders think that the outlook for defaults continues to worsen. As a result the anticipated losses have to be covered by the majority of customers who do fulfil their obligations. This tends to indicate that the banks are supporting those economists who foresee a worsening unemployment rate. Now that the government is clearly planning savage cuts in expenditure the fuller, longer term affect of the credit crunch it is coming home.

We have to advise that despite the recent signs of recovery, the best advice remains batten down the hatches.