Atom Bank boss slams rivals for not raising interest rates for savers

The boss of a British challenger bank has attacked ‘hand-wringing’ rivals for not raising interest rates for savers.

Mark Mullen, the chief executive of Atom Bank, accused leading lenders of passing on as little as possible – fuelling the debate on ‘profiteering’.

It comes after a crunch meeting between bank bosses and the Financial Conduct Authority this week saw the regulator urge the likes of Barclays and HSBC to raise rates for savers.

Rapidly rising interest rates set by the Bank of England have led to led to higher mortgage costs. But savings rates have increased nowhere near as fast.

The average two-year fixed mortgage rate is now over 6.5 per cent while the average easy access savings rate for £10,000 is just 2.49 per cent.

Wading in: Atom chief executive Mark Mullen (right) and Chancellor Jeremy Hunt

Chancellor Jeremy Hunt said recently that it was taking ‘too long’ for savers to enjoy higher returns, while the Commons Treasury Committee has urged banks to ‘up their game’.

Mullen has also now waded in. ‘It drives me bloody bananas when hand-wringing bankers talk about supporting customers but are not passing on interest rate rises to savers,’ he told the Mail.

‘Savers have had a pretty rotten time since the global financial crisis and through no fault of their own interest rates have been on the floor.

‘You get to a point where you have got this perfect storm of high inflation and interest rate rises. What do the banks do? They sit on their hands and pass on as little as they possibly can to the people who actually fund their growth.’

Mullen said banks were using higher rates to boost profits rather than help customers. Much of the controversy centres around banks’ ‘net interest margin’ – the difference between what lenders charge borrowers and pay savers.

The Atom chief, who held several senior positions at HSBC before leaving in 2014, rejects the idea that bigger banks are not able to act as fast in passing on rates because of their size.

‘I have spent 24 years of my life in big banking,’ he said. ‘I know the game. And I left the establishment because I don’t like playing it.

‘It is got nothing to do with agility or pace at all. It is to do with enjoying widening spreads.’

Mullen said lenders were ‘taking advantage of an interest rate environment that is not of their making’ – but said this will not fix their underlying business models.

Atom Bank offers customers 5.95 per cent on a one-year fixed-rate savers’ account, compared to 4.95 per cent at Lloyds and 5.55 per cent at NatWest. Data from the Bank of England shows that £250billion of customer cash is in accounts that pay no interest.

The row over profiteering comes as savers face a growing tax bill. Rising interest rates mean that even those with modest nest eggs are dragged over the threshold for paying tax.

Interest on savings is tax free up to a maximum of £1,000 a year for basic rate taxpayers and £500 for those paying the higher rate.

When the personal savings allowance was introduced in 2016 a basic-rate taxpayer could hold around £70,000 and a higher-rate taxpayer £35,000 without having to pay a penny of income tax on interest.

Today, a basic-rate taxpayer needs about £20,000 – or £10,000 for a higher-rate payer – to be hit. As a result, savers are set to pay £6.6billion in tax on the interest this year, up from £3.4billion last year and £1.2billion in 2021.

This post first appeared on Dailymail.co.uk