Overdraft rates at record high

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The Independent Online

Overdraft rates reached a record high during August as current account providers continued to re-price their deals, figures showed today.

The average rate banks and building societies charged customers who went into the red rose to 19.1% during the month, to reach its highest level since the Bank of England began keeping records in 1995.

Financial information group Moneyfacts said there was general trend for lenders to streamline their current account offerings, often pulling their best deals in the process, while a number of providers had also hiked their rates during August.

Credit card rates also remained at elevated levels, with lenders charging average interest of 16.7% on outstanding balances, unchanged from the previous month, but still the highest level since February 2002.

Michelle Slade, of financial information group Moneyfacts.co.uk, said: "We are seeing a lot of new credit card deals coming out, but while the interest-free periods may be longer, providers are increasing the interest rate borrowers revert to pay for it."

But there was better news for people looking to take out a mortgage, with rates on tracker deals for people with a 25% deposit falling to a new record low of 3.55%, down from 3.72% in July.

Five-year fixed rate deals also got cheaper, dropping to 5.1% from 5.24%, the ninth consecutive month during which the cost of the loans has either improved or stayed the same.

The latest fall left the interest charged on these mortgages for people borrowing 75% of their home's value at its lowest level since May 2009.

Two-year fixed rate mortgages for people with a 25% deposit also improved slightly during the month, with average rates falling to 3.74% from 3.77%.

But there was worse news for savers, with the returns paid on two types of deposit account falling during the month.

The Bank of England figures showed that the average return people can earn on a tax-free ISA dipped to 0.6%, down from 0.69% in July, while notice accounts are now typically paying interest of 0.91%, compared with 0.92% in July.

Returns on branch-based instant access accounts were unchanged at an average of 0.23%, but there was a slight improvement in the interest paid on fixed rate bonds, with this rising to 2.37% from 2.3%, although returns remained well down on the average of 3.05% that was paid in August last year.

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