The average interest rate on agreed overdrafts now stands at 14.22% the highest level since May 2000. Last time overdraft charges were so high the Bank of England’s base rate was at 6% however the current base rate is just 0.5%.
However the rise is in part due to changes in policy which some banks have introduced following debates and court cases regarding unauthorised overdraft charges. The changes mean that banks are now making less money from unauthorised overdraft charges and have as result increased the charges on authorised overdrafts.
However, the British Bankers' Association (BBA), which represents the banks, has branded the theory as too simplistic. "The interest rate offered during that period and cost of banking was unsustainable. The economics of the industry has changed.”