'Massive worry' more will turn to payday loans amid highest rise in interest since 1980s

There are fears more people looking to borrow money will turn to payday loans and face owing large amounts in interest, on top of their original loan.

It comes after the Bank of England announced the highest increase in interest since the 1980s, with its base rate rising from 2.25% to 3% in a bid to control inflation - but it means the cost of borrowing is likely to increase.

A credit union in Cardiff says this is a "massive worry", with many struggle to afford rising bills.

Cardiff and Vale Credit Union is warning potential borrowers to do their research before committing to a loan.

"If you borrow £100 from a credit union for example, you're paying approximately between £5-7 interest on it," Rizwan Shams from the Cardiff-based credit union explained.

"With the high interest lenders, if you're borrowing £100 you may end up paying another £100 in interest and charges. That's a huge difference."

Rizwan said the interest rate rise is a huge concern and they are seeing first-hand how high-interest loans can impact families.

He said: "It's a massive worry right now, and a lot of people are coming to us asking, 'How can you help me?'

"And that's why we encourage people to try and do savings if they can.

"If you are looking for a loan don't just go to anyone, do your research before you go for a loan and go to the credit unions of Wales website where you can see who your local credit unions are and what they're offering."

He added: "We are seeing a huge impact not only on individuals but on their families as well.

"That's why we are urging people to be wary of the high-interest lenders out there and do your research."

Mamadu Djola is just one of the people who has turned to the Cardiff and Vale Credit Union.

He has won an award for helping others understand the benefits of using a credit union rather than turning to payday loans, using his own experience.

He said: "I've had a loan from my bank for a long time, since 2006, but the interest rate is very high.

"That's why I'm not advising anybody to go and borrow money where they know the interest rate is very high.

"Secondly, the situation, actually where we are at the moment, is not easy."

One of those he's offering advice to is Hazel Hill, who uses the food pantry scheme, attached to the credit union.

Hazel said: "You were paying stuff off before this came in, and suddenly you have got to try and still pay them, and try and get back on your feet. It's very difficult."

She has also changed her eating habits to save money, often going back to the way her mother cooked for her as a child, saying: "We used to cook fresh food - it's cheaper.

"I did that when the price of tinned foods when like that [up]. I still only had £20 then to spend on food and I couldn't afford to go and eat tinned stuff.

"So what I did, I started cooking fish and I kept within my budget."

Hazel says she also does more stocking up than she used to and tries to keep more organised about what she buys.

She also goes out less than she did before in an attempt to save money.

Rebecca Evans, the Welsh Government’s Finance Minister, has said today’s interest rate rise will make a difficult situation even tougher for many people and businesses who are already struggling to make ends meet.

“The Bank of England has warned we are facing a long and deep recession that risks jobs, businesses and public services. The Chancellor must use his autumn statement to turn away from austerity and instead invest in the UK and deliver a meaningful and targeted cost-of-living support package.”

Today's interest rate hike puts the figure at its highest since 2008.

However, earlier this month, markets had predicted the interest rate increase could be as much as one percentage point but sentiment has calmed somewhat after the change of Chancellor and Prime Minister and Bank of England bond purchases pushed down on the cost of borrowing.

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