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With the announcement this week that the Financial Conduct Authority (FCA) will introduce a number of changes to make overdrafts fairer and easier to manage for borrowers, Moneyfacts.co.uk has examined data regarding unarranged overdraft fees. Our research discovered that consumers who use an unarranged overdraft by as little as £10 for two days could be charged as much as £25. Four providers across 11 current accounts would apply a charge in this example, of which two banks would charge more than the original unarranged overdraft amount:

Table 1 Current Accounts charging a fee for an unarranged overdraft of £10 for two days

Borrowers who go over their limit by £100 for five days would see 19 providers charge them a fee, with an average cost of £32.98:

Table 2 Current Accounts charging a fee for an unarranged overdraft of £100 for five days

Of the 142 accounts reviewed by Moneyfacts.co.uk, 90 accounts from 27 providers would not charge a fee at all in this scenario.

Michelle Monck, finance expert at Moneyfacts.co.uk, said “Our research shows that consumers can end up paying a high penalty for even the smallest unarranged overdraft. Banks and building societies can vary their fee structure depending on the specific account you have with them. So, consumers should regularly review their current account fees and check if switching to another account with the same provider or to a new provider who might provide them with a better safety net.  From April 2020, new rules come into force that will remove fixed fees from overdrafts and stop unarranged overdrafts being priced at a higher rate.  This should mean that some of the very highest fees shown in our research are limited in the future.”

This week the best rate in both the moving home and remortgage charts was 1.26% discounted variable for two years. For first-time buyers the best rate on offer was also a variable rate of 2.54% discounted variable for two-years. While variable rates were the most competitive rates across all the charts, there were still good deals that could be found within the fixed rate charts across all mortgage types.

A deposit of £1,000 was needed by savers to get the best rates in both the fixed rate bond and notice account charts this week, with the top rates in these charts being offered at 2.76% fixed and 1.92% variable respectively. Savers with a lower deposit could still get a competitive rate within these charts however those with a deposit of less than £500 would find more choice in the easy access saving chart where the top rate on offer was 1.50% variable for a £1 deposit.

A report on the Government-backed Help to Buy Equity Loan scheme has been published by the National Audit Office.

In the report it was revealed that two-fifths (37%) of buyers would not have been able to purchase a property without the support of Help to Buy, which it estimates to have led to around 78,000 additional sales of new-build properties since the scheme started. In addition to this, the scheme has helped younger buyers onto the property ladder, as 63% of first-time buyers were aged 34 and under.

While 81% of Help to Buy loans were provided to first-time buyers, the scheme was intentionally set up to be accessible to a wide range of property buyers. As a result, homeowners were able to use the scheme to purchase a larger or more expensive property, which resulted in 19% of buyers who previously owned a property using the scheme to buy, on average, more expensive properties than first-time buyers.

Furthermore, 31% of buyers said that they could have purchased the property they wanted without the scheme, which the report estimates to have led to 65,000 households using the scheme who could have purchased the house they wanted without it. In addition to this, over the whole scheme, 10% of buyers had household incomes over £80,000 (or over £90,000 in London).

According to the report, 5% of buyers were in arrears who bought in the first 11 months of the scheme, which is above the national average as according to figures from UK Finance, in the first three months of 2019, 2.5% of homeowners were in mortgage arrears. These homeowners may find themselves in difficult circumstances as the report states that buyers who want to sell their property soon after they have purchased it might find themselves in negative equity, mainly due to the fact that new builds typically cost 15-20% more than an equivalent ‘second-hand’ property.