Cost of borrowing on the rise

Banks have massively hiked interest rates on personal loans during the slump, raising the cost of finance for cars, sofas, and other major purchases by hundreds of pounds, new research undertaken for The Independent shows today.

Figures from the personal finance group Defaqto show the average annual percentage rate (APR) on a £5,000 loan has jumped from 9.8 per cent to 13.9 per cent in the past two years, increasing the cost of borrowing by 42 per cent.

The Independent also suggests that the banks are using the high rates to discourage unsecured borrowing, as they repair damage done to their balance sheets by reckless lending.

Metro Bank gets official approval

A proposed new High Street bank, Metro Bank, has been given a banking licence by the Financial Services Authority (FSA). The bank plans to open two branches in central London in the next three months but also has plans to expand to more than 200 in Greater London within ten years.

"The banking environment was fundamentally changed following the credit crunch, and we have seen seismic changes in the retail UK banking industry as a result," said Anthony Thomson, Metro Bank chairman.

"With the FSA authorisation of Metro Bank we are entering a new era of banking, one where we go back to a more traditional banking model where customer service is key and there is deposit based lending.

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Cost of borrowing on the rise