Bank margins at record levels

Category: Banking
Date: 7/21/2010

In a week when Vince Cable has blasted the UK's banks for ripping off customers, research conducted by Moneyfacts.co.uk has found that bank margins are at record levels.

Lenders have made a concerted effort to cut the rates on fixed rate mortgages in an attempt to prise borrowers from record low variable deals.

Recent figures from Moneyfacts.co.uk showed that consumers are currently enjoying the lowest rates seen in seven years.

However, rates on unsecured lending continue to rise, with lenders taking record margins. Currently, the average rate of interest charged on personal loans is 12.6%, meaning the margin it sits over the base rate of interest is 12.1% - an all time high.

The same is true for credit cards which, charging an average interest rate of 18.8%, sit 18.3% above the Bank of England's measure.

The margin between authorised overdraft rates and the base rate is also at a record high, with borrowers paying an average rate of 14.24%.

"Despite the UK economy moving out of recession, a number of market indicators and sentiments remain subdued for unsecured lending," said Michelle Slade, spokesperson for Moneyfacts.co.uk.

"Customers successfully applying for unsecured credit are paying a heavy price as the increased risk is passed on through increased margins.

"Until banks and building societies repair their balance sheets, it's highly likely these increased margins are here to stay

Find the best bank account for you - compare bank accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at anytime.