Britain’s biggest banks need to “up their game” and stop fobbing off millions of loyal customers with “measly” savings rates, according to the head of an influential committee of MPs.
MPs on the Commons Treasury committee have been investigating why, when the Bank of England interest rate has increased 12 times in a row to 4.5%, many leading banks are still offering easy access savings accounts paying less than 1%, and in some cases as little as 0.25%.
They had already accused bank bosses of seemingly “taking advantage” of loyal customers, while the Financial Conduct Authority said in April that it had challenged some banks that had been miserly with their savings rate increases.
The FCA warned that “onerous interventions” would be considered if it concluded its concerns were not being properly addressed.
The consumer body Which? has also sounded the alarm, saying that high street banks “have been short-changing savers by paying unjustifiably low rates for years”.
The Barclays Everyday Saver easy access account offers only 0.7% interest and Santander Everyday Saver pays 0.85%, while the Lloyds Bank Easy Saver is offering 0.9% unless customers have got £25,000-plus stashed away. Virgin Money’s Everyday Saver is paying just 0.25%.
At the same time, some smaller players such as challenger banks and building societies are offering eye-catching rates: Saffron building society recently launched an account paying a fixed 9% rate, while Skipton building society announced one with a 7.5% rate. However, some of these high-paying accounts have a number of restrictions relating to who can sign up and how much can be saved.
About 60% of household deposits are held in instant access accounts, according to the Bank of England, which said last month the passing on of interest rate rises to savers had been “unusually weak”.
Harriett Baldwin MP, the chair of the Treasury committee, said that in the wake of the Bank of England’s comments, it was “clearer than ever that the nation’s biggest banks need to up their game and encourage saving”.
She added: “While other products are available to those who shop around, the measly easy access rates on offer lead us to conclude that loyal customers are being squeezed to bolster bank profit margins.”
Baldwin said the committee remained concerned that the “loyalty penalty” was particularly an issue for older and vulnerable customers, who may still rely on high street bank branches.
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Jenny Ross, the editor of Which? Money, said the MPs were “right to hold [the high street banks] to account for this”.
Which? said the new “consumer duty” regime being brought in by the FCA from 31 July – which sets higher, clearer standards of protection and explicitly requires companies to put customers’ needs first – “must mean tough action against firms who continue to offer such meagre rates”.
In April, the FCA said the “harm” caused to millions of loyal high street bank customers earning low interest on their savings was likely to have worsened as interest rates have risen.