23 October 2006
Banks are expected to raise interest rates following the decision of the Office for Fair Trading (OFT) to recommend a full investigation of the payment protection insurance (PPI) market by the Competition Commission (CC).
PPIs are designed to provide alternative means for paying off a loan if the worst should happen, such as the consumer falling ill, losing their job, or becoming incapacitated.
The investigation carried out by the OFT last week discovered that many of the providers of PPIs were not providing value for money and misled customers on how extensive the cover provided was.
If the impending CC's investigation agrees with the findings of the OFT and declares that customers are being over-charged, banks and building societies could respond by raising their rates.
Nick White at uSwitch.com, the price comparison website, said: "The high pricing of PPI by banks is clearly subsidising the historically low loan rates on offer.
"We would not be surprised to find that the knock-on effect of a clampdown on the dubious selling practices and high pricing will be a steady increase in interest rates, signalling the end of an era for rock-bottom loans," he added.
Make a personal loan comparison with uSwitch.com and find the personal loan best suited to your needs.
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