New banks face hurdles to win over consumers

Around 72 per cent of people think new entrants into the banking sector, such as Metro Bank, Virgin Money and Tesco Bank, will lead to greater competition and better products and services, according to price comparison website uSwitch.com.

More than half are also looking forward to having an alternative to the existing high street banks, while 45 per cent think new entrants will learn from the mistakes made by other banks.

But despite this only 38 per cent would consider moving their current account to one of the new players and 31 per cent said they were worried that the new banks would lack experience.

Around 11 per cent said they would also not be confident that their money was safe.

Only 14 per cent of people said they trusted their existing bank completely, with 39 per cent saying they trusted it "to a degree", but a third of people thought a new entrant would not be as established or secure as an existing player.

However, 51 per cent of people think new banks will offer a fresh start and 37 per cent think they will be innovative and change banking for the better.

Dilshad Issa, personal finance expert at uSwitch.com, said: "While consumers are quick to criticise the banks, when it comes to their money there is real truth in the saying 'better the devil you know'.

"For better or for worse, consumers know what to expect from the traditional banks."

n The number of people with a variable rate mortgage who are overpaying their home loan doubled during 2009.

The UK's biggest mortgage lender Lloyds Banking Group said 14 per cent of its customers with a variable rate mortgage overpaid their loan during 2009, up from 7 per cent the previous year.

The group said the average size of regular overpayments made by Lloyds TSB and Halifax mortgages customers rose from 269 to 336 per month during the same period.

Despite the increased rate at which people were paying their mortgage, the group said low interest rates meant average monthly repayments among those who were overpaying were still 50 less than before interest rates started to fall.

Someone with a 100,000 mortgage on which they were charged interest of 3.5 per cent could knock three years and six months off their mortgage term and save 7,610 in interest if they overpaid by 50 a month.

People with a mortgage of this size will have seen their monthly repayments fall by around 275 as a result of the Bank of England base rate dropping to 0.5 per cent.