No, Not Quite

Let\’s rearrange this so that it makes sense shall we?

Lenders have put up the cost of taking out a personal loan by up to four per cent as they start to pass on the cost of the credit crunch.

Lenders have started to charge properly for loans after years of underpricing them relative to the risks of default: the thing that started the credit crunch.

2 comments on “No, Not Quite

  1. Lenders have not been “underpricing” loans. The default rate has not changed. The cost of borrowing for the lenders has increased which is now being passed onto customers.

    Tim adds: The “lenders” are borrowing as you say. The price of their doing so has risen, without an increase in hte base rate. Thus those who lend to the lenders are charging them more for the risk, correct?

  2. “The default rate has not changed.”

    Not yet, maybe, but risk is about pricing in future defaults.

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