Lloyds, NatWest among banks to make billions as mortgage and savings rates grow apart By Proactive Investors

Proactive Investors – Lloyds Banking Group PLC (LON:LLOY), NatWest Group PLC (LON:NWG) and other UK banks are set to rake in billions of pounds after a flurry of mortgage rate rises in recent weeks have not been accompanied by lifted savings rates.

All of the UK’s major banks have added costs as speculation builds of another Bank of England interest rate hike on Thursday, including HSBC Holdings PLC (LON:HSBA) which rejigged mortgage deals twice last week.

This prompted average two-year fixed mortgages to jump above 6% over the weekend, marking the highest rates since last December’s mini-budget-hit figures, according to Moneyfacts.

“They’ve been quick to hike rates on their mortgages sky-high,” Hargreaves Lansdown (LON:HRGV) analyst Sarah Coles commented, “savings rates […] remain disappointing” though.

Though the banks have lifted savings rates, these boosts are few and far between, with Lloyds, Santander and Barclays PLC (LON:BARC) offering sub-1% rates on Everyday and Easysaver accounts.

“[This] means they’re raking in billions from growing net interest margins. The only way to stop them getting away with this is to vote with your feet and move somewhere more rewarding,” Coles said.

NatWest shook up mortgage offerings over the weekend, pulling two and five-year fixed deals with loan-to-values of 60%, 80% and 85%.

Fixed two and five-year 75% loan-to-value deals saw rates increased by the bank meanwhile, with the cheapest standard two now including rates of 4.94% and 4.59% respectively, according to NatWest.

Lloyds charges a minimum of 6.25% on an 85% to 90% loan-to-value two-year fix for a person moving into a £200,000 home, meanwhile, with this falling to 5.83% for a five-year deal.

AJ Bell analyst Laith Khalaf explained that while “savings deposits are not their only source of funding for mortgages,” banks do indeed “make a turn on the difference between savings rates and mortgages”.

HSBC, Nationwide and Banco Santander (BME:SAN) were among other large lenders to hike rates in recent weeks, as bankers price in prospective interest rate hikes expected later this week.

Coles pointed out that banks were beginning to offer savings rates above 4% for those “happy with an account with restrictions”.

These include HSBC’s 5% Regular Saver and NatWest’s 6.17% Digital Saver accounts, though restrictions include minimum monthly deposits and caps on the amount on which the higher rates are paid.

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interactive investor analyst Myron Jobson commented such deals were indeed “attractive,” but people should be wary of “higher inflation erod[ing] the value of the savings”.

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