Several high street banks have been challenged to increase their savings rates by MPs concerned over their sluggish response to successive official rate rises by the Bank of England, underlined on Thursday by a further quarter-point increase.
MPs on the Treasury select committee wrote to Nationwide, Santander, TSB and Virgin Money this week, widening their campaign for banks to improve their interest rates on easy access savings accounts.
It follows the committee’s earlier engagement with the big four banks — Barclays, HSBC, Lloyds and NatWest — which in February gave evidence defending their offerings by arguing that they offered market-leading rates on regular savings accounts.
MPs have highlighted double-digit growth in pre-tax profits at banks and rising net interest margins — the difference between savings and lending rates — with banks moving swiftly to increase rates on lending products such as mortgages in response to higher BoE base rates.
“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,” said Harriett Baldwin, chair of the Treasury select committee, in a statement on Wednesday.
As official rates have risen, consumers have borne the brunt of high inflation but are still not receiving respectable returns on their deposits.
The BoE raised rates by 0.25 basis points to 4.5 per cent on Thursday — the twelfth consecutive increase since December 2021. Investors expect rates to remain high for much of the remaining year.
MPs launched an inquiry into retail banks in February, attacking slow savings rate increases and challenging executives over their failure to pass on benefits to consumers.
In a response to MPs’ questions in March, NatWest chief executive Alison Rose said the taxpayer-backed bank had seen a surge in net revenue from £80mn to £1bn between 2021 and 2022.
Like other senior bank executives, Rose pointed to the low level of savings in the UK, citing figures which showed that one in four people have less than £100 in savings. The big four, however, have said around 20 per cent of retail customers hold more than £5,000 in instant access accounts.
“Savers who compare the top easy access rates will find they currently pay 3 per cent or more,” said Rachel Springall, finance expert at comparison site Moneyfacts. She said challenger banks and building societies offered better returns and were covered by the Financial Compensation Service Scheme.
Chip, an investing and savings app, offers an easy access rate of 3.71 per cent. The Post Office offers around 3.47 per cent, though this includes a bonus of 2.57 per cent for 12 months.
Baldwin added: “We are concerned that the loyalty penalty may be particularly severe for elderly or vulnerable customers . . . Consumers should continue to vote with their feet and find better offerings.”
Virgin Money said it offered a broad range of savings accounts, while Nationwide said its average deposit rate had been at least 42 per cent higher than the market average. Nationwide offers 1 per cent on its easy savings account, while Virgin Money’s everyday saver account is at 0.25 per cent.
Santander and TSB said they would respond to the committee in due course. They offer 0.7 and 0.9 per cent, respectively, on easy access savings accounts.