By Elliot Wright, 23rd February 2010
The cost of an authorised overdraft has crept up by 10% over the
last two years, according to research by Moneynet.co.uk.
A study by the financial advice website revealed that,
currently, someone who is overdrawn by £1,000 for six months of the
year pays £76.63 in interest charges - an average interest rate of
15.32%.
However someone overdrawn by the same amount for the same
duration in February 2008 would have paid overdraft interest
charges of £69.25, a rate of 13.75%.
Since the research was conducted, Barclays have announced they
are hiking up their overdraft interest rates for two million of
their current account holders despite the Bank of England base rate
having remained at 0.5% for 18 months.
With the regulators and the majority of bank customers focussing
on "unfair" unauthorised bank charges and penalty fees, the cost of
authorised borrowing has gradually been increasing in the
background.
Andrew Hagger of Moneynet.co.uk said: "No doubt lenders will
point to increased risk and default levels as a result of the spike
in unemployment seen during the recession. However as and when the
economy returns to a stronger footing and unemployment falls, I'm
not convinced that the cost of borrowing will recede.
"The figures above don't include the recent rate increases
announced by Barclays which come into play at the end of April, and
we may yet see more providers follow their move in the months
ahead.
With savings rates falling whilst the cost of loans, credit
cards and overdrafts are heading in the opposite direction, it's no
surprise that many people are so disillusioned with financial
services providers in the UK."
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