Overdraft rates double

BORROWERS are being charged more than double the rate for their overdrafts compared with this time last year.

The average arranged overdraft rate has risen from 12.34 pc to almost 27 pc in that period following new rules introduced in April, according to the data firm Moneyfacts.

The regulator banned banks from charging extra fees for borrowing. Instead, firms can now only apply an annual interest rate.

Yet Moneyfacts calculates that the new rules have reduced the average cost of borrowing £500 for 30 days to £9.91 from £12.49.

The average rate fell to 10.89 pc in June when banks offered coronavirus support measures including payment freezes and £500 interestfree buffers. This cut the cost of borrowing £500 for 30 days to £4.27.

Unarranged borrowing has also become cheaper, despite the average rate soaring from 6.58 pc to 14.55 pc.

In September last year, those who dipped into the red would pay £39.52 on £500 for 30 days. This has fallen to £5.61.

The new rules were meant to make overdrafts cheaper or the same for 70pc of borrowers. However, almost eight million overdraft customers will be worse off as a result of the new annual interest rate.