Increase savings rates, MPs tell big banks

MPs have today stepped up the campaign for banks to increase the interest rates banks pay on customers’ savings.

The cross-party Treasury Committee of MPs has contacted the chief executives of the UK’s largest banks asking if they believe all their savings rates provide ‘fair value’, and whether customer inertia is being exploited.

At the end of this month, the Financial Conduct Authority will introduce the consumer duty, a requirement for firms to always act in good faith and deliver fair value for their customers.

Fair value? Some of the big banks continue to pay 1% or less on standard easy-access accounts

The MPs asked the chief executives if they are confident their current savings products are in line with the consumer duty.

They also asked if the new rules will change their interactions with customers, and what steps they will take to notify their customers of higher rates available.

Despite a new era of higher interest rates that has seen the Bank of England’s base rate pushed up from 0.1 per cent to 5 per cent in the space of 18 months, some of the larger banks continue to offer savings account that pay 1 per cent or less.

For example, Santander’s Everyday Saver pays 0.85 per cent, Halifax pays 0.95 per cent on balances up to £10,000, and Barclays pays 1 per cent on its Everyday Saver.

Savers will be hoping that the added pressure of a rising base rate may encourage some of the biggest banks to up interest on savings.

The average easy-access savings rate across the entire market now pays 2.43 per cent, according to Moneyfacts. The best easy-access deal currently pays 4.25 per cent.

Separately, the committee has also written to the FCA, asking if banks have changed their savings rates as a result of the regulator challenging them and how fair value for customers will be assessed.

The regulator has also asked what enforcement action can be taken if firms do not comply with the consumer duty, and how it will judge whether banks are making enough effort to encourage savers to switch to higher rates.

Harriett Baldwin MP, and 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.’

On the up: Lately, average savings rates across the market have been rising with smaller challenger banks and building societies leading the charge

Dame Angela Eagle MP, member of the Treasury Committee, condemned what she described as ‘blatant profiteering’ by the banks in the middle of a cost of living crisis.

She added: ‘It’s clear to me this behaviour is miles away from the incoming requirement for firms to treat their customers fairly and with respect.

‘When the committee began its inquiry into retail banks in February, the big four banks offered between 0.5 and 0.65 per cent easy access savings rates. 

‘Today, the big four offer rates between 0.9 and 1.75 per cent. The Bank of England interest rate is currently 5 per cent.’

This post first appeared on Dailymail.co.uk