- By Michael Race
- Business reporter, BBC News
Image source, Getty Images
Bank chief executives have been summoned by the UK’s financial watchdog to address concerns that savings rates are not rising as fast as mortgages.
Bosses at Lloyds, HSBC, NatWest and Barclays are to meet the Financial Conduct Authority (FCA) on Thursday.
Higher interest rates have seen banks raise mortgage costs but there are concerns that higher returns are not being passed on as quickly to savers.
The Financial Times, which first reported the meeting, said FCA officials would discuss with the banks the pricing of cash savings and how they communicated with their customers on rates.
“We do think there is more value that can be provided to consumers, we are not happy with some of the lower savings rates we see, and we want banks to be supporting customers… and people to be able to make informed choices,” the newspaper quoted one person familiar with the FCA’s position as saying.
All four of the major banks have been contacted by the BBC for comment.
The UK’s central bank, the Bank of England, has been steadily increasing interest rates since December 2021.
The Bank’s base rate, which usually dictates the borrowing costs of lenders, is at 5%, meaning it costs more for people to borrow money, but they should get more for their savings.
Last week, figures released to the BBC by financial information firm Moneyfacts showed the gap between average mortgage and savings rates was wider than in December 2021, when the Bank of England first started increasing interest rates in its battle to slow the speed of rising consumer prices.
Back then, the average two-year fixed mortgage rate was 2.38% and the average easy access savings rate – which is the most common savings account based on £10,000 of savings – was 0.19%, a gap of 2.19%.
On Monday, the average two-year mortgage deal hit 6.42% and the savings rate was 2.43%, a gap of 3.99%.
While the gap has widened since interest rates were first raised, it is smaller than in December 2022, when it was 4.24%.
Banks’ profits are generally increased by interest rate rises, as they typically boost net interest income: the amount of money banks can increase borrowing costs, versus the amount they pay out in interest on deposits.
The FCA has said it will produce a report by the end of the month on how well the cash savings market is supporting savers.
However, the Financial Times reports some of those due to attend the meeting have warned that the FCA intervention is regulatory over-reach.
“The worry is you end up in a situation where you have regulators trying to dictate price – that is a dangerous place to be,” one chief executive told the newspaper.
The chancellor has said banks are “taking too long” to pass on increases in interest rates to savers and that he has raised it with bosses.
In February, the chief executives of Lloyds, HSBC, NatWest and Barclays were questioned by MPs over the generosity of their savings rates.
The banks argued then that savers had access to a host of competitive deals, but the banks have faced further criticism with Lloyds’ interest rates on savings described as “measly” in June.
UK Finance, the trade body for the banking sector, has previously said saving and mortgage rates “aren’t directly linked and therefore move at different times and by different amounts”.
“Savings rates are driven by a number of factors, not just the Bank of England’s Bank Rate – one key factor is whether someone wants instant access or can deposit money for a longer period of time,” the body has said.
