Banks blasted by MPs for failing to pass on base rate rises to savers

MPs have stepped up pressure on banks – yesterday accusing them of ‘blatant profiteering’ over meagre savings rates.

Lenders have been blasted for being too slow to increase the returns offered to savers even as they sharply hike borrowing costs.

Chancellor Jeremy Hunt last week threw his weight behind the claims and said the problem needed to be resolved.

It follows months of intense scrutiny by Parliament’s Treasury select committee, which has written to the chief executives of Barclays, Lloyds, HSBC and Natwest – led by Alison Rose – complaining that rates still seem ‘too low’.

‘Profiteering’: Lenders have been blasted for being too slow to increase the returns offered to savers even as they sharply hike borrowing costs

Harriett Baldwin, chairman of the committee, said banks were failing in their social duty.

The MPs have also written to the Financial Conduct Authority (FCA), the City watchdog, to explain how it is clamping down on the lenders and whether the imposition of a new ‘consumer duty’, which comes into force at the end of this month, will help them to lay down the law.

The banks have now been summoned for a meeting with the FCA on Thursday.

Labour MP Angela Eagle, a member of the committee, said yesterday: ‘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.’

It comes after the Bank of England raised its benchmark interest rate sharply from 0.1 per cent in December 2021 to 5 per cent today. Financial markets expect it to hit 6.25 per cent in coming months.

In response, High Street banks have increased borrowing rates sharply. The average rate on a two-year fixed rate mortgage deal is now well above 6 per cent with five-year deals climbing close to that level. Yet savings rates have risen only sluggishly.

The MPs noted that the rates on easy access savings accounts at the big four banks were somewhere between 0.9 per cent and 1.75 per cent.

Banks tend to benefit when interest rates rise as they profit from the difference on returns paid out to savers and the higher rates charged to borrowers. 

Time for action: Treasury select committee chairman Harriett Baldwin (left) and Natwest Chief exec Alison Rose

But with households already being squeezed by stubbornly-high inflation – and recent figures showing that, in real terms, disposable income has been falling for five out of the past six quarters – politicians are pushing lenders to do better by their customers. 

Baldwin 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.’

Another committee member, Tory MP Andrea Leadsom, said: ‘While banks play a vital role in our society, stimulating economic growth and supporting thriving businesses, it’s quite clear they have failed to pass on the rise in interest rates to savers.

‘At a time of rising profits, banks have the opportunity to do the right thing – and I’d encourage them to do so.’

This post first appeared on Dailymail.co.uk