Interest rates rise expected following OFT decision on PPI.

Investigations conducted by the watchdog have discovered dubious selling practices of PPI's by providers. The OFT is contemplating proposing further investigations by the competition commission.

London (loans-bazaar) October 23, 2006: Banks are likely to increase rate of interests following the decision by the Office for Fair Trading (OFT) to suggest a full investigation on the payment protection insurance (PPI) market.

PPI's are intended to provide alternative means to consumers for paying off loans in case of any eventuality.

An investigation carried out by the watchdog last week revealed that many PPI providers are not providing consumers the value for money and misleading them on the insurance coverage.

If the imminent Competition Commission's investigation concurs with the findings of the OFT then it is expected that banks and building societies would respond by raising their interest rates.

Nick White an expert in the lending market, said: The high pricing of PPI by lenders is evidently subsidising the historically low loan rates on offer. We would not be astonished to find that the incidental effect of a tighten up on on the dubious selling practices and high pricing will be a steady increase in interest rates on secured personal loans, unsecured loans etc., signalling the end of a period for rock-bottom loans.

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