Cost of living crisis: Millions of savers miss out as UK banks pocket profits from higher interest rates
The UK’s major banks have failed to pass on last month’s interest rate rise to millions of savers, according to Moneyfacts.
While British lenders have raised mortgage rates, banks are seemingly taking advantage of the interest rate rise to bolster their margins at the expense of customers.
The financial information company’s analysis of over a hundred banks and building societies revealed just four have increased the interest rate on some of their easy access, variable savings accounts.
Only Suffolk Building Society has passed on the full 0.15 per cent rise to savers across all variable account.
None of the major banks have done so, even though Santander, Lloyds and Halifax all announced increases to their standard variable mortgage rates by the full 0.15 per cent shortly after the Bank of England’s decision on December 16.
This follows the Bank of England opting to raise interest rates last month to cool rising inflation, with its monetary-policy committee voting by a margin of eight to one to raise interest rates from 0.1 per cent to 0.25 per cent.
The decision has made the UK the first big rich economy to experience interest-rate rises since the start of the pandemic.
Inaction from banks means customers are missing out on billions of pounds in interest and the value of their savings is falling faster in real terms.
The Telegraph has reported that savings accounts are still offering as little as 0.01 per cent in interest, even while inflation is on its way to hitting six per cent.
A 0.15 per cent savings rate rise would see savers take home £30 more a year in interest based on a £20,000 investment.
The meagre interest rates contrast with the hikes to many fixed-rate loans.
HSBC, Barclays and NatWest all raised rate, while Nationwide started the new year by increasing rates on some of its loans by as much as 0.45 percentage points, three times the Bank of England’s 0.15 percentage point increase.
The findings are a further blow to British households which are already struggling with a cost-of-living crisis amid soaring energy bills, tax increases and higher prices at supermarket tills.
Politicians and campaigners have accused central banks of taking too long to pass on the potential benefits to savers.
Speaking to The Telegraph, Steve Baker, Conservative MP and former member of the Treasury Select Committee, said: “A generation has grown up not knowing worthwhile rates on cash savings so it is particularly galling that the banks have not passed on the base rate rise to savers. If they cannot do so profitably in this unprecedented interest rate environment, let them say so.”
Prime Minister Boris Johnson is due to hold talks with Chancellor Rishi Sunak to discuss possible ways of reducing the burden of rising energy bills on households.
Business Secretary Kwasi Kwarteng has been holding talks with industry leaders and market regulator Ofgem over recent weeks – with the consumer price cap expected to rise by as much as 50 per cent next Spring to £2,000.
No options have yet been approved, however an expansion of the Warm Homes Discount Scheme – which provides a £140 saving to 2.2m of the UK’s poorest households – is one of the options under consideration.
Last week, 20 Tory MPs and peers including five former cabinet ministers published a letter in The Telegraph calling for environmental levies and VAT to be scrapped, estimating a potential £200 annual saving for UK households.