Overdrafts cost 10% more, study shows

A six-month debt of £1,000 that cost £69.25 in 2008 now comes at a price of £76.63, online comparison company Moneynet.co.uk has revealed.

The average interest rate on an authorised overdraft in February 2008 was 13.85 per cent and it has gradually crept up to be 15.32 per cent today- an increase of ten per cent.

These figures do not include Barclays’ recently announced plans to raise lending rates and Andrew Hagger of Moneynet.co.uk fears other banks may follow this example.

Mr Hagger suggested that lenders might cite the current risks of lending in defence of rising overdraft costs.

In addition, he said: “As and when the economy returns to a stronger footing and unemployment falls, I’m not convinced that the cost of borrowing will recede.”

Research by moneysupermarket.com indicates that five million adults in the UK – ten per cent of the population – are permanently in the red.

By Holly Brooke-Smith