Personal loan interest rates are continuing to soar despite the recent cuts to the base rate.

The cheapest loan available is now 8.2 per cent – that is more than four times the base rate at 2 per cent. Experts say that providers may actually be trying to price themselves out of the market as the availability of credit continues to be squeezed.

Several providers have increased personal loan rates in the past four weeks – including Barclaycard by 2 per cent, Sainsbury's Finance by 1 per cent, and Britannia building society and Lombard Direct by 0.5 per cent.

Louise Bond of uSwitch.com said: “Recent activity in the loans market seems to indicate that providers are actually battling to get themselves out of the best buy tables. The cuts by the Bank of England are simply not being felt by people looking to take out a personal loan.”

Lending on personal loans dropped by 26 per cent in October in comparison to the same month last year, according to uSwitch.com. Whilst six months ago borrowers could get rates of 7 per cent or less, all of these deals have now disappeared. Moneyback Bank, which consistently offered loans as low as 5.5 per cent over the past two years, has closed for new business completely.

Last year almost 1.3 million people took out an unsecured personal loan to consolidate debts – but with interest rates rising and credit being harder to obtain, less borrowers will have that option.

Ms. Bond said: “We have seen the death of the sub-8 per cent loan era which is really bad news for consumers trying to consolidate debts.”

The best interest rate on a £10,000 loan over five years is now with Asda at 8.2 per cent, whilst Lombard Direct is offering a fixed rate personal loan at 8.3 per cent. Bank of Scotland and Halifax are both offering 8.6 per cent on their internet personal loans.