Yahoo Finance Four top banks’ ‘measly’ savings deals attacked by MPs
A powerful group of MPs has demanded answers from four high street banks over their failure to pass on higher interest rates to savers.
Today the Treasury Select Committee sent letters to the chief executives of Nationwide, Santander, TSB and Virgin Money, asking them to defend paying “measly” savings rates to customers while the Bank Rate is soaring.
Banks have enjoyed record profits on the bank of successive rises in the Bank of England’s interest rate, which has risen 11 times since December 2021 and currently stands at 4.25pc, yet they continue to offer savers rates below 1.5pc.
Nationwide reported profits before tax of £1.6bn in 2022, up 94pc year-on-year. However, it pays just 1.26pc to its instant access saver account holders.
Virgin Money, meanwhile, offers a mere 0.25pc interest on its everyday saver account, which is what the Bank Rate was back in January 2022.
Banks have been quick to pass on higher rates to mortgage borrowers but savers’ cash is still languishing in accounts offering abysmal returns.
The gap between how much interest Virgin Money makes from borrowers, and the amount it pays savers – its net interest margin – has widened from 1.62pc to 1.91pc since 2021, the MPs said.
The Committee asked the four banks and building societies – who make up for a quarter of all personal accounts – why savings rates are so low compared to the Bank Rate.
It also pressed them to explain how they determine their savings rates and how they make customers aware of other higher rates available to them, especially those with large balances.
Harriett Baldwin, chairman of the committee, said the group of MPs was concerned that the “loyalty penalty” could be “particularly severe for elderly or vulnerable customers who may not be able to take advantage of higher rates available online”.
She added that consumers should continue to “vote with their feet” and find better offers.
“This, more than anything, will drive the banks to increase their currently measly rates,” she said.
The group of MPs is expanding its campaign to get banks to pay better rates to savers after writing to Barclays, HSBC, Lloyds and NatWest in February.
Since the Committee began its inquiry into retail banks, the so-called “big four” have increased their rates from between 0.5pc and 0.65pc to between 0.7pc and 1.3pc.
But these rates are still well below the Bank Rate, which is expected to rise yet again to 4.5pc tomorrow, increasing already sky-high mortgage costs and putting more pressure on banks to improve their offerings for savers.
