The House of Commons Treasury select committee yesterday questioned senior executives from the UK’s major banks including Matt Hammerstein, CEO of Barclays UK, Charlie Nunn, CEO of Lloyds Banking Group, Ian Stuart, CEO of HSBC UK and Alison Rose, CEO of NatWest Group.

Bank closures due to ‘changing behaviours’

When asked about the wave of bank closures that had been hitting the UK, the CEOs went on the defensive.

Stuart said: “Customer behaviours started to change in 1982 with the advent of the cash machine. And it’s been on a journey from that point and it’s speeded up.

“And through the pandemic it accelerated, there’s no question that customers changed their banking behaviours.”

Rose said: “We’re seeing significant shifts in customer behaviour.”

However, she acknowledged that the needs of vulnerable customers needed to be taken into account.

She said: “But we recognise we need to look after all of our customers and make sure that we support particularly vulnerable customers.”

Quicker on mortgages than savings

When asked if lenders were better at putting rates up for mortgage borrowers than they were for savers, Stuart said he spoke to customers all the time who had asked him the same thing.

He said when he looked back at the changes to the base rate over the years, the bank was being “honourable in passing them on in the same way”.

However, Harriett Baldwin MP, chair of the Treasury committee, said the lenders’ savings rates had been below 1% but they had been raised quickly after being asked to appear before the committee.

She asked if they relied on the “inertia” of customers to move their savings accounts away to another bank.

Hammerstein said that was not representative of how they engaged with customers.

Stuart added that five and a half million emails had gone out to customers encouraging them to get onto better savings products.

The effects of the mini Budget

The panel also spoke about the impact of the mini Budget. Rose said it caused “huge disruption” as gilt and swap rates grew “very quickly”.

In response, NatWest introduced tracker mortgages to “help inoculate those people from the immediate crisis, and we gave them the option at any point to move onto a fixed product or a product of their choice if they needed to”.

She said mortgage rates were coming down and the bank was looking at ways to help customers manage their finances.

Nunn said Lloyds was assessing the customers who were under financial strain and found that about 1% were struggling. As for mortgages, he said 10% of customers would be seeing an increased mortgage cost when coming off a fixed rate this year.

Nunn said Lloyds was “laser focused” on how to support them and help manage their debt.

As for the long-term impact of the disruption, Stuart said at the time his team were looking at “60,000 customers in December who were going to be impacted by an increase in mortgages”.

He added: “That caused a lot of consternation in our organisation because the last thing I wanted was for customers to be forced into a mortgage product which was looking like 7% at that time.”

HSBC UK thought about introducing a mortgage product with a rate starting at 4% but was unsure if that was possible, but noted that the market had calmed since.

He added: “80% of our time was focused on those 60,000 customers who were anxious.”

Stuart also pointed to the five-year fixed mortgage it launched at 3.99% yesterday.

When asked about high standard variable rates (SVRs) and whether arrears had risen, Stuart said SVRs were not a long-term solution as most borrowers sat on them until better rates became available. The panel all noted that they had not seen a rise in arrears and these remained below pre-Covid levels.

Buy-to-let burden

In addition, the panel was quizzed on how it would help to support the social and private rental sector amid increasing pressure from the Government.

Nunn said it was a challenge on two fronts – the cost of maintaining a mortgage and the sustainability requirements coming in for landlords by 2026.

“Those two things together are making the business case for some of our customers very difficult to stay in the buy-to-let space,” he added.