Overdraft rates at ten year high - Banking - News - Moneyfacts

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Overdraft rates at ten year high

Overdraft rates at ten year high

Category: Banking

Updated: 12/05/2010
First Published: 12/05/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
The average overdraft rate has reached its highest point in a decade, research conducted by Moneyfacts.co.uk has revealed.

Despite the low interest rate environment, the average authorised overdraft rate currently stands at 14.22%.

The last time the average overdraft rate was as high as it is now was in May 2000, when the Bank of England's base rate of interest was 6.00%.

Figures show that since March 2009, when the Bank first cut the base rate to 0.5%, five providers, encompassing Barclays Bank, Clydesdale Bank, Nationwide BS, Norwich and Peterborough BS and Yorkshire Bank, have raised overdraft rates, with increases ranging from 1.55% to 3.40% over the last 14 months.

The trend of raising overdraft rates has come despite banks winning the test case against the Office of Fair Trading, although there are still accounts available that charge holders 0% or a relatively low rate.

"Changes made to reduced unauthorised borrowing charges meant banks lost a significant revenue stream, something they can ill afford in the current climate," commented Michelle Slade, spokesperson for Moneyfacts.co.uk.

"As one revenue stream closed inevitably they have moved to find another. The loss of income gained from a minority of customers is now being recouped from all customers who use an agreed overdraft.

"Banks are likely to be making more now from these increases than they ever were from penalty charges. Customers remain reluctant to switch current accounts, but it's a decision that could leave them out of pocket, as the biggest current account providers in the UK have some of the highest rates on the market."

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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 Any products featured may be withdrawn by their provider or changed at any time.

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