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Overdraft rates increase

A recent report has found that a large number of banks have put up overdraft rates in response to recent interest rate hikes.

The Bank of England's monetary policy committee raised interest rates by 0.25 per cent in both August and November, leaving the current rate of interest at five per cent.

Moneyfacts.co.uk claims that in response, many high street banks have changed their overdraft policies and have increased their charges.

"This is not something that we have witnessed previously; usually lenders review overdraft rates on a less frequent basis," the company comments.

"It seems that a number of the main providers are raising their overdraft rates each time the base rate increases, even though their accounts are not directly linked to the Bank of England Base Rate."

It added that although the changes may go unnoticed by many customers, they could well add up and be a big earner for the banks.

Customers are advised to compare overdraft fees of banks and to consider switching account if they could be getting a better deal elsewhere.

To borrow money without an overdraft, click here to see how much you could borrow with Lombard Direct.

14/12/2006 15:33:23

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