Following the Bank of England (BoE)’s rate rises, mortgage costs have risen swiftly, putting more financial strain on homeowners. But savings rates have not risen as quickly, particularly at the big high street banks, and now they’ve been ordered to explain why.
The Treasury Committee has written to the bosses of Lloyds, HSBC, Natwest and Barclays along with the Financial Conduct Authority (FCA) to ask if the banks believe all their savings rates provide ‘fair value’ to customers and whether customer inertia is being exploited.
It said when it began its inquiry into retail banks in February, the big four banks offered between 0.5 per cent and 0.65 per cent for easy-access savings rates. Today, they offer rates between 0.9 per cent and 1.75 per cent.
The market-leading easy-access account pays 4.35 per cent and this is an online account from Family Building Society while one-year fixed-rate bonds now pay over six per cent.
‘The time for action is now’
Harriett Baldwin MP, chair of the Treasury Committee, said: “With interest rates on the rise and our constituents feeling squeezed by rising prices, it is only right that the UK’s biggest banks step up their measly easy access savings rates. The time for action is now.
“The biggest high street banks have a particularly important role to play in encouraging saving. Currently, they are failing on that social duty. We look forward to receiving answers to these important questions in due course.”
The FCA will also meet with the heads of these four banks on Thursday to discuss why savings rates are not rising as quickly.
The BoE has been increasing the base rate since December 2021 and it now sits at five per cent. During this time, mortgage rates have risen and the average two-year fixed-rate mortgage has now breached six per cent.
Yet savings rates have failed to keep up and it is largely challenger banks that have responded quickly by upping their rates, and they remain dominant at the top of the best-buy savings tables.
The high street banks have previously been criticised for not passing on rates to savers and Which? revealed that although the base rate had risen 1.25 per cent between 1 December 2022 and 1 May 2023, at the same time the average rates on instant-access savings accounts have risen by just 0.63 per cent.
‘Squeezing higher profits from their loyal savings customers’
Dame Angela Eagle MP, member of the Treasury Committee, said: “In the middle of a cost of living crisis, the high street banks are squeezing higher profits from their loyal savings customers.
“This blatant profiteering has been shocking, and it’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect.”
