Yesterday MPs blasted Barclays, HSBC, Lloyds Banking Group and NatWest Group for failing to pass on higher interest rate to their customers while simultaneously ramping up their mortgage rates.
The cross-party Treasury Committee accused the big four of boosting their profits by increasing the gap between the interest paid out to savers and the interest they charge borrowers.
MPs said customers can expect to earn between 0.50 percent and 0.65 percent on basic savings accounts from the big four banks, and demanded bank bosses explained why rates were so low.
The Bank of England has repeatedly hiked base rate from 0.1 percent to four percent since December 2021, but the big banks have been reluctant to follow suit.
BoE figures show that they doubled variable-rate mortgages from two percent to four percent last year, but increased fixed-rate Isas from 0.5 percent to just one percent.
There is nothing new in this. For as long as I can remember, Barclays, HSBC, Lloyds and NatWest have been enfuriatingly slow to pass on base rate increases to savers, while instantly jacking up their mortgage rates.
It’s the oldest trick in the book.
Now they have a fresh opportunity to boost the bottom line, thanks to the last year of rocketing interest rates.
Higher rates allow the banks to widen their net interest margins, the difference between what they pay savers and charge borrowers.
Banks are boosting their profits and savers and borrowers are paying the price, said Laura Suter, head of personal finance at AJ Bell. “The bigger the difference between savings and mortgage rates, the bigger the profits.”
Suter also said that savers can also be their own worse enemies. “They can be lazy when it comes to moving their savings to get a better rate.”
She is right. The big banks are playing a slippery game, and unless savers fight back, they will continue to see them as easy prey.
Taxpayers may have bailed out the banking sector during the financial crisis, but they have had little in return.
When the government lavished the big four with cash after the meltdown, via the Funding for Lending Scheme, they took full advantage.
Banks no longer needed customer deposits to fund their lending, so slashed savings rates to the bone.
Millions stashed away cash during the pandemic and continue to leave it on deposit where it earns next to nothing.
Around £268billion is sitting in accounts paying zero interest, according to analysis by Coventry Building Society.
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This comes at a time when smaller, challenger banks pay interest rates of more than four percent.
Anna Bowes, founder of savings rate tracking service Savings Champion, called this a “long-running scandal” and said savers must “vote with their feet”.
“Loyalty does not pay. If your bank is giving you a rotten deal, it’s time to move on. Otherwise you are throwing money away.”
Savings Champion’s figures show that challenger banks Tandem, OakNorth and Shawbrook all pay more than three percent a year with easy access.
As does Newcastle Building Society. Atom Bank pays 2.95 percent.
Savers who are willing to lock their money away for a set period can get 4.17 percent from SmartSave’s one-year fixed rate bond.
A saver with £10,000 would get £417 a year from that, whereas they might get just £55 if they left it in the Barclays Everyday Saver account, which pays 0.55 percent.
For those able to tie their money up for longer, Ford Money pays fixed rate of 4.25 percent for two years and 4.40 percent fixed for five years.
Bowes said savings rates are unlikely to rise much further from here, as banks anticipate interest rates may soon peak and could even start falling. “If you see a good deal, grab it.”