Yahoo Finance Banks warned against profiteering after making extra £8bn from interest rate crisis
Banks have been warned against using the mortgage crisis to boost profits – as analysis reveals the top four lenders have made an extra £8bn from rising rates.
The City watchdog is understood to be monitoring the market ahead of its launch of its Consumer Duty law next month which will require banks to treat customers fairly.
It comes as earlier this year, the head of Financial Conduct Authority said that loyal customers were being ripped off by banks refusing to raise savings offers even as interest rates climb.
Banks have been quick to pass on successive increases in the Bank Rate – which has risen from 0.25pc in January to 4.5pc – to mortgage borrowers. But savers still face relatively paltry returns, especially when compared with inflation.
The Bank of England is expected to raise the rate to 4.75pc on Thursday and by 5.75pc by the end of the year, piling pressure on homeowners who are facing mortgage rates of over 6pc.
Successive interest rate rises have led Barclays, NatWest, Lloyds and Santander to report large increases in their “net interest income” – the difference between what they charge borrowers and pay savers, analysis by The Telegraph has found.
Danny Kruger, a Conservative MP and a member of the Treasury Select Committee, called on the FCA to take action.
He said: “Something is clearly going wrong when banks are profiting from increasing interest rates but savers aren’t benefiting from them. The FCA needs to urgently investigate.”
Big banks have reported increasingly large uplifts to their net interest income since the Bank Rate began rising at the end of 2021.
NatWest has had the biggest gains in its net interest income, which has surged by £3.3bn since January 2022. Its pre-tax profits leapt 49pc to £1.8bn in the first three months of 2023 compared with a year ago.
The bank’s standard easy access account pays 1.11pc on deposits under £25,000, according to the analyst Savings Champion.
Lloyds reported increases in net interest income worth £2.9bn, which have helped boost pre-tax profits to £2.3bn in the first three months of 2023 – up 46pc on the same period last year. The bank is paying 0.9pc on easy access deposits of less than £25,000.
Barclays UK has boosted its net interest income by £1bn since January 2022. Last month, the bank reported profits of £2.6bn in the first quarter of this year – a 16pc jump from a year earlier.
Santander UK’s net interest income has surged by £734m. The company’s net profits rose to €2.57bn globally in the first three months of 2023 – this was only up 1pc on the previous year, but came after a new record was set in 2022.
Barclays and Santander are both still offering easy access returns of 0.85pc.
The FCA has recently warned that big banks were harming longstanding customers by refusing to raise savings offers, saying its new consumer protection rules from July would require a “significant cultural shift”.
Nikhil Rathi, chief executive of the FCA, said it has “challenged” some of the worst offenders who failed to increase returns fairly or did so with a long delay compared to increases to mortgage rates.
The Treasury Select Committee also wrote to the heads of Britain’s biggest banks to raise its concerns as parts of its investigation into banks’ savings rates.
A spokesman for UK Finance, the banking trade body, said: “The rates firms offer on their savings products are driven by a number of different factors, and there are generally higher rates available if people can deposit their money for a longer period of time rather than having instant access.
“Banks are commercial organisations and therefore seek to offer the best possible value to customers while also making a profit, which allows them to invest in their business for the benefit of customers and deliver shareholders, including pension funds, a return on their investment. Savings rates have been increasing and we would always encourage people to shop around for the product and interest rate that is suited to their needs.”
