MPs quiz banks about ‘measly’ savings rates
The committee is calling on the banks to increase the savings rates offered to loyal customers.
In the letters sent today, and published online, the cross-party committee of MPs question Nationwide, Santander, TSB and Virgin Money on their easy access savings accounts.
The committee asks why available savings rates are much lower than the current base rate, how the banks and building societies determine the level of interest rate increases to pass on to savers, and whether they inform customers that higher alternatives may be available.
The Treasury Committee defines Nationwide, Santander, TSB and Virgin Money as ‘scale challengers’. Figures from the Financial Conduct Authority (FCA) show the four institutions account for a quarter of all personal current accounts.
Base rate changes not being passed on
In the letter to Nationwide, the committee states that the base rate currently stands at 4.25% but the interest rate on the Nationwide ‘instant access saver’ account for deposits is 1.25%.
The letter questions how Nationwide determines how increases in the base rate are passed on to its savers and why the interest rate on the savings account is so much lower than the base rate.
It also asks how Nationwide communicates with its consumers, in particular those with large balances in their ‘instant access saver’ account, to make them aware of higher rate savings options available.
The letters to the other banks ask similar questions and point out that Santander and Virgin Money pay 0.7% and 0.25% respectively on their ‘everyday saver’ accounts, while TSB pays 0.9% on its ‘easy saver’.
The correspondence follows similar questions of the ‘big four’ banks – Barclays, HSBC, Lloyds and NatWest back in March. The four big players were asked to explain why, when the base rate increased, they were quicker to raise mortgage rates than savings rates.
The big banks now pay more on their easy access accounts than the banks and building societies written to today. Barclays pays 0.7% on its instant access account, Lloyds 0.85%, Natwest 1% and HSBC 1.3%.
Big profits, low savings rates
Harriett Baldwin MP, chair of the Treasury Committee, said: “Recent results announcements show that the UK’s biggest banks are continuing to squeeze record profits from their loyal savers. In a high interest rate environment, and with further Bank of England base rate rises possible, banks must do more to encourage saving.
“As a committee, we would like to know why savings rates offered by banks and building societies are so much lower than the current base rate, and whether banks tell their loyal customers better deals could be available. We are concerned that the loyalty penalty may be particularly severe for elderly or vulnerable customers who may not be able to take advantage of higher rates available online.
“Consumers should continue to vote with their feet and find better offerings. This, more than anything, will drive the banks to increase their currently measly rates.”