Lenders criticised for charging "excessive" default interest rates

Octane says lenders can 'conceal' default interest rates by labelling the default rate as a 'standard' interest rate, which can be up to 4% per month if borrowers fail to meet their payment schedules.

Mark Posniak, managing director at Octane Capital, commented: “By charging ridiculously high default interest rates and, in some cases, concealing them as standard rates of interest, the industry is doing itself no favours.

"Lenders should work with borrowers who are struggling, not least because that way those same borrowers are more likely to get back on track. Instead, some lenders are kicking borrowers when they’re down, which is not just greedy and self-serving but plain myopic.

"I suspect some lenders are doing this because competition in the industry means margins are being squeezed and so default interest rates can be an instant boost. It’s almost as if they want borrowers to default. But it’s bad for the industry’s brand and makes absolutely no business sense. We’re urging brokers to be extra-cautious and triple-check the small print, especially given the slow-moving market, which is putting clients under greater pressure.”