Is your bank ripping you off?
Actually, scrap that, the question should be: are you allowing your bank to rip you off?
We all know that banks and building societies like to pass on rate hikes in a more timely and complete fashion to borrowers than they do to savers.
Yet, as interest rates have been picked up off the floor and hurled into the sky over the past year, Britain’s big banks have been thoroughly indulging themselves.
Analysis by This is Money revealed the extent of this last week, when number crunching of Britain’s Big Five banks’ annual results showed they raked in an extra £7billion from widening net interest margins.
Coining it in: Britain’s big banks have widened the gap between what they charge borrowers and pay savers and bumped up their net interest margins
Net interest margin is a key banking industry figure, measuring the gap between what borrowers are charged and savers are paid.
The bigger the number, the better the spread, and the more profit for the bank.
Our figures showed the full scale of how Barclays, NatWest, Lloyds, HSBC and Santander made extra money by passing on more of the Bank of England’s interest rate hikes to borrowers than savers.
In total, the banks scooped a tidy £39.9billion in total from the gap between savers and borrowers. This is how much each bank made on net interest margins.
Of course, you would expect banks to make some money on this. A banking industry with no or very low net interest margins is not going to be a particularly stable one – and we all have long enough memories to remember why we like banks and building societies to have a healthy degree of stability.
Nonetheless, the Big Five clocking up an extra £7billion means that they made a chunky 21 per cent more from net interest margins than they did a year earlier.
And don’t forget, our analysis only looked at the figures from the big banks, the real cost to savers once you add in the rest of our banks and big and small building societies will be much greater.
You’d like to think that after years of rock bottom rates – and a recent history of such illustrious insult accounts as the 0.1 or even 0.01 per cent savings rate – that banks would try to offer savers a better deal as the base rate finally started to climb.
Instead, we saw the mini-Budget mortgage panic – which sent mortgage rates soaring even higher than base rate hikes – combined with moves to swipe a bigger chunk of change off unwary savers.
That has even managed to land bank bosses in front of the Treasury Select Committee for a grilling on why customers seem to be getting a raw deal.
The highlight of this was the dubious claim that savers don’t really want better rates on nice simple easy access savings accounts but instead more complicated regular savers with all their inherent catches.
But should savers be unwary here? I would argue that they shouldn’t.
We know big banks have been treating us with disdain by paying pitiful rates on legacy accounts, we know smaller challenger banks and building societies offer better rates, we know loyalty does not pay and that you need to move your savings to the best deal.
So, to go back to my earlier questions: are banks ripping us off or are we allowing banks to rip us off?
I’d largely blame banks but argue we also need to take control of the situation.
We should expect better but a banking industry we bailed out not so long ago has refused to treat us fairly.
That means we need to vote with our feet, stay on top of our savings, and move our money to the best rates.
At This is Money, we are here to help you do that. These are five things you need to do it.
> Best savings rates: our independent tables
> Five of the best cash Isas: our pick of the top deals
> Savings alerts: Get emailed when a good new deal lands
> Saving & banking: Our section with the latest news and tips
