People are having to pay significantly more for everyday banking services than they were a month ago as providers ramp up the cost of credit and cut the interest paid by current accounts.

Since the quarter-point cut in the base rate last month, many of the largest banks have pushed through far greater cuts for account holders, while charging more for overdrafts, mortgages and credit cards.

Halifax customers suffered a double hit early this month when the bank cut the rate on its high-interest account by a full percentage point, while raising the overdraft rate by 60 basis points.

Alliance & Leicester and HSBC have cut the rates on their premier accounts by up to half a point, while Natwest and the Royal Bank of Scotland have increased overdraft rates, says the Moneyfacts.co.uk website.

Next month, Nationwide current-account holders face a more drastic cut when the bank slashes its credit interest rate from 3.75 to 2 per cent and increases overdraft rates by 3 percentage points.

Bankruptcy applicants on rise

The number of debtors applying for bankruptcy rose from a two-year low in the first quarter, suggesting some people are starting to feel the financial effects of higher household bills and tighter credit conditions, writes Delphine Strauss.

Ministry of Justice figures showed debtors’ petitions for bankruptcy rose 12 per cent quarter on quarter in the first three months of the year, although at 13,080 they were still 13 per cent lower than in the same period last year. Bankruptcy petitions launched by debtors also rose 5.8 per cent on quarter to 4,851.

The number of companies making winding-up petitions rose 2.6 per cent to 2,965, but was 10 per cent lower than the year before.

The data do not show how many individuals and companies went into bankruptcy or liquidation after making a petition but they paint a similar picture to figures released by the Insolvency Service this month. Howard Archer, economist at Global Insight, said the numbers did “not make particularly alarming reading at this stage”, but this reflected economic growth above the trend rate. With the economy “set for extended weakness”, he said, insolvencies were likely to rise markedly over coming months.

These changes are an extra blow for people already struggling with rapidly rising mortgage rates and other living expenses, such as food and utility bills. Mortgage rates are at their highest for some years and could rise further now that early base-rate cuts look doubtful.

“A large proportion of the population are going to be hit at a time when they can least afford it,” said Michelle Slade, an analyst at Moneyfacts. “Banks are trying to keep margins up and the effects are now spreading further than higher mortgage rates into other areas.”

Banks have seen their profit margins squeezed by the credit crunch, as it has become more expensive for them to access funds. They are also concerned that the Office of Fair Trading could impose a cap on penalty fees charged when a customer exceeds an overdraft limit or bounces a cheque.

A £12 cap was applied to credit-card charges two years ago. Since then, the average purchase rate on cards has jumped from 14.9 per cent to 16.4 per cent, according to Moneyfacts.

The recent spate of increases in overdraft rates could be a pre-emptive move by lenders to mitigate any similar cap on current-account fees.

“Banks are now being creative on how they can claw back some margin,” said Kevin Mountford, head of savings and current accounts at the Moneysupermarket.com site.

“Certain tactics are in play across all product sets, which collectively add a lot to the bottom line – and hits the consumer’s pocket.”

Lloyds TSB, Natwest and RBS have also recently increased the monthly fees on their packaged current accounts, in some instances by up to 20 per cent. These accounts typically cost between £7 and £20 per month and provide extra benefits such as worldwide travel insurance, breakdown services and some personal concierge services.