Banking analysts believe that the new plans of the government, which include the ringfencing of banks is likely to affect the economy because of high borrowing rates for the first-time buyers due of limited opportunities.

They claim that the new plans, which involve the separation of retail and investment section of banks, will also affect millions of people, who do not have large deposits in the banks.

Adrian Lowcock at Bestinvest said, “The ringfencing of deposits and retail banks will affect the bank’s return on capital, to ensure they continue to maintain their profits the banks are likely to pass on the cost to their clients”.

Experts said that banks will have to bear increased administrative cost after ringfencing as they will have to manage two separate operations.

After ringfencing, banks will not be able to subsidize retail offerings with profits on the investment side whereas government claims that separating retail and investment section of banks will safeguard the savings of ordinary consumers.

In a recent analysis, Sir John Vickers said that with ringfencing banks will have to raise average mortgage rates by around 1% which will in turn add to the repayments.