- Banks bump up interest rates despite a record low base rate
- Rising interest rates are ‘the final straw’ for many people desperately trying to keep afloat since the start of the recession
Banks have pushed the interest rates on credit cards, mortgages and overdrafts to their highest levels in three years despite the base rate being kept at a historic low.
The Bank of England has held the base rate at 0.5 per cent since March 2009 to help ease the pressure on cash-strapped families.
However, banks have steadily increased rates across the board and the interest charged on overdrafts alone is the highest since records began – and 40 times more than the base rate.
Pressure: Despite record low interest rates banks are pushing up the costs of overdrafts, credit cards and mortgages
Andrew Hagger, of the comparison website Moneynet, said rising interest rates were ‘the final straw’ for many people who have been desperately trying to keep afloat since the start of the recession.
He said: ‘Whether it is their overdraft or credit cards, consumers are being hit with ever-increasing borrowing costs. With people suffering pay freezes and increased demands on their dwindling disposable income, higher banking charges will be the final straw for some.’
The data from the Bank of England reveals the average ‘agreed’ overdraft rate in January was 19.51 per cent, the highest level since the Bank’s records began nearly two decades ago.
At this level, the average ‘authorised’ overdraft rate is nearly 40 times higher than the base rate.
It means an overdraft of £1,000 a year would cost £195.
Bumped up: The big five high street banks, including HSBC, all have mortgage rates in place that are the highest for nearly three years
These are just average interest rates – the worst offenders are charging up to 50 per cent for a credit card and 30 per cent for an unauthorised overdraft.
Millions of homeowners with a standard variable rate mortgage are typically paying 4.16 per cent – again, the highest rate since March 2009. The data comes just days after the five largest banks – HSBC, Santander, Barclays, Lloyds and Royal Bank of Scotland – revealed their results for last year.
Overall, the ‘Big Five’ made total profits of £10.7billion from their high-street operations.
Marc Gander, founder of the Consumer Action Group, said: ‘If consumers think that banks are suffering alongside them in this economic crisis, they really do not understand what is going on. The banks have never had it so good and I can’t imagine them ever wanting it to end.’ Meanwhile, savers with an instant access account are being ignored. In March 2009, the average rate was 0.19 per cent. Today it has barely changed to a paltry 0.2 per cent.
Savers with £1,000 in a savings account, would only have received £1.52 a year after paying basic rate tax. Today they would get £1.60, an increase of just 8p. This pathetic return on savings is in stark contrast to the huge bill which the banks charge for an overdraft. Simon Rose, from campaign group Save our Savers, said: ‘It has been nearly three years since the base rate was cut to 0.5 per cent, and there is no prospect as far as we can see of rates going up.
‘It is economically stupid and morally indefensible to treat savers in this way.’
Debt experts warned that higher interest rates were piling pressure on people who are already in the red by pushing them further into debt.
A spokesman from the Consumer Credit Counselling Service said: ‘Households are being hit by a ‘double whammy’.
‘High interest rates and the squeeze on household budgets across the board are combining to make it even harder for people to repay their debts, and many are at risk of falling even further behind.’
Yesterday the British Bankers’ Association said banks compete for customers, adding: ‘Anybody would be advised to shop around for the best deal for their circumstances.’
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