- By Michael Race
- Business journalist, BBC News
image source, Getty’s image
The bank’s chief executive has been summoned by Britain’s comptroller to address concerns that savings rates are not rising as fast as mortgages.
Bosses at Lloyds, HSBC, NatWest and Barclays will meet with the Financial Conduct Authority (FCA) on Thursday.
Higher interest rates have led banks to raise mortgage costs but there are concerns that higher returns are not being passed on quickly to savers.
The Financial Times, which first reported on the meeting, said FCA officials would discuss with the bank the price of cash savings and how they would communicate with their customers regarding rates.
“We think there’s more value to be provided to consumers, we’re unhappy with some of the lower savings rates we’ve seen, and we want banks to support customers… and people to be able to make informed choices,” the paper said. cites one person familiar with the FCA’s position.
The four major banks have been contacted by the BBC for comment.
England’s central bank, the Bank of England, has been steadily raising interest rates since December 2021.
Banks’ base rate, which usually determines the cost of a lender’s loan, is 5%, which means it costs more for people to borrow money, but they have to get more into their savings.
Last week, figures released to the BBC by financial information firm Moneyfacts showed the gap between average mortgage and savings rates was wider than it was in December 2021, when the Bank of England first started raising interest rates in its battle to slow the pace of rising consumer prices. .
Back then, the average two-year fixed mortgage rate was 2.38% and the average easy access savings rate – which is the most common savings account based on £10,000 in savings – was 0.19%, a difference of 2.19%.
On Monday, two-year mortgage deals averaged 6.42% and the savings rate was 2.43%, a 3.99% difference.
Meanwhile, the gap has widened since the interest rate was first raised, smaller than December 2022 which was 4.24%.
Bank profits generally increase as interest rates increase, because they usually increase net interest income: the amount of money banks can raise borrowing costs, versus the amount they pay out as interest on deposits.
Speaking to the BBC’s Today programme, Harriett Baldwin, chair of the Treasury Select Committee, said the committee had been pressuring banks all year over the issue, because “we are quite convinced that these interest rates are very low and that banks are not treating our constituents fairly”.
“We are particularly concerned about some of our older savings constituencies who are unable to use internet banking and find it difficult to make the switch,” he added.
FCA said it would produce a report at the end of the month on how well the cash savings market is supporting savers.
However, the Financial Times reports that some of those who will attend the meeting have warned that the FCA’s intervention went beyond the reach of regulations.
“The worry is you end up in a situation where you have regulators trying to dictate prices – that’s a dangerous place,” one chief executive told the paper.
The chancellor said the bank had “took too long” to pass on the rate hike to savers and that he had raised it with the boss.
In February, the chief executives of Lloyds, HSBC, NatWest and Barclays were questioned by lawmakers over the generosity of their savings rates.
The bank later argued that savers had access to a number of competitive offerings, but the bank faced further criticism with interest rates on Lloyds deposits described as “meager” in June.
UK Finance, the trade body for the banking sector, previously said savings and mortgage rates were “not directly linked and therefore move at different times and by different amounts”.
“Savings rates are driven by a number of factors, not just the Bank of England Bank Rate – one of the main factors is whether someone wants instant access or can deposit money for a longer period of time,” the agency said.
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