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Lending rates skyrocketing

[ Posted March 8th, 2012 ]

Despite the fact that the Bank of England base rate is still sitting at the historical low of 0.5%, banks are still hitting household budgets hard by tightening and increasing mortgage rates, interest rates on credit cards, and increasing their interest on overdrafts.

In fact, new figures released from the Bank of England show that the gap between the base rate and the average mortgage is now wider than it has been since January1995, which is when records documenting the gap were first recorded. Also at its highest peak yet is the lending rate assigned to overdrafts, which currently sits at 19.5%.

While the news focuses most on the rising costs of home ownership and jumps in the average fixed mortgages and SVRs deals, those who hold credit cards are also feeling the pinch in their pocket every month. The average credit card interest rate is now 17.3%; the highest that it has been in the last decade. Many experts are now turning an eye to the banking system, stating that the banks are taking advantage of the situation to profit when lenders should still be benefiting due to the low base rate.

Former chairman of the Treasury Select Committee, Lord McFall, stated that due to this fact many people are losing their faith in the banking sector. Given the fact that the public had to bail to out the banks with their hard earned taxes, it seems unfair that the banks are now charging more for services than they should be.

The latest increase in SVRs from many high street banks that announced their mortgage rate increase over the last few weeks is where most homeowners are feeling the strain, making the public feel as if they have not been given a fair deal.

Figures from the Bank of England reveal that the average interest rate assigned to a SVR mortgage was 4.16% during January, which is a 3.66% difference from the base rate. This gap is the largest it has been in almost two decades, and mortgage levels are expected to get even worse over the next few weeks.

In fact, a rate increase from Halifax this week has already affected 850,000 homeowners and with other banks expected to follow suit the amount of people affected will only increase.  Although Halifax only increased their SVR by 0.49%, for those with a £150,000 mortgage, this means an extra £40 each month must be found to meet the payments

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