Overdraft charges creep to highest recorded level ever

While the Bank of England’s base rate has been kept at its ultra-low rate for over three years now, the overdraft fees charged by banks and building societies have crept upwards to their highest recorded level ever, according to the Bank’s recently released figures.

The BoE’s data indicates that the average interest rate on an authorised overdraft now stands at 19.52 per cent, which is almost 40 times higher than the current 0.5 per cent base rate.  Anyone with a £1,000 overdraft over the course of a year would be left paying £195 in interest alone when it came time to clear their debt.

However, industry experts point out that authorised overdraft rates have always been high – and sometimes exorbitantly so.  In March of 2009, when the BoE’s Monetary Policy Committee made the decision to slash the base rate, the average rate on an authorised overdraft was 18.62 per cent, which means that while overdraft fees have been rising steadily over the past five years, the increase overall has been less than one percentage point.

Regardless, overdraft rates are at their highest point since 1995, when records began to be kept on rate fluctuations.  Not only are those who use overdrafts regularly taking a bath, the nation’s savers are being hosed as well, as the rates of return on savings products plummet to the ground.

Some instant access savers have an absolutely paltry interest rate of just 0.01 per cent, independent research findings say.  This means that a £1,000 deposit made into one of those ultra-low paying accounts three years ago would have accrued a paltry 24p once basic tax was taken into account.

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