- By Michael Race, Kevin Peachey & Nick Edser
- BBC News
Image source, Getty Images
Banks offering unjustifiably low savings rates to their customers will face “robust action”, the UK’s financial watchdog has said.
The Financial Conduct Authority’s (FCA) warning came as part of a plan to ensure banks are passing on interest rate rises to savers.
Under new rules that came into force on Monday, banks must prove they are offering their customers fair value.
Separately, a campaign to help those struggling with mortgages has started.
Lenders have launched a series of adverts promoting the support available to mortgage holders if they are have difficulty with repayments.
‘Fair value’
The Bank of England has now raised interest rates 13 times in a row in an attempt to reduce inflation, and is expected to increase rates again on Thursday.
However, while interest rates on mortgages have risen quickly, savings rates have not been rising as fast.
It says firms offering the lowest savings rates “will be required to justify by the end of August how those rates offer fair value” or face action.
The FCA will also publish an analysis every six months of firms’ easy access savings rates, in a list from best to worst.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes and firms prompt savers to switch to accounts paying higher rates.
“We welcome the progress that has been made so far but this needs to speed up.”
To ensure banks comply, the FCA will be using new consumer protection rules which came into force on Monday.
The new Consumer Duty has been billed as the biggest shake-up in regulation for the finance industry in decades.
It aims to ensure people are treated fairly and are served by financial products they can understand,.
The duty should end hidden charges and make sure providers of products such as savings accounts and mortgages inform people of any better deals available.
What do I do if I can’t afford to pay my debts?
It is important that you do talk about financial difficulties before finding yourself in a spiral of debt. The earlier, the better.
If you think you cannot pay your debts or are finding dealing with them overwhelming, seek support straight away. You are not alone and there is help available.
A trained debt adviser can talk you through the options available.
The FCA said it should also help people like Samantha, who was a victim of financial domestic abuse. Her ex-husband had opened two overdrafts worth £1,000 in her name.
“I was asked multiple times on different calls to give my bank card number, balance and details of recent transactions, but I had no access to these accounts. There was no understanding or empathy at all,” she said.
“I’m very lucky that I have a strong network of support around me. I can’t imagine how hard it is for people who don’t have any support because even with it I was pushed to my limits.”
However, there have been questions raised about whether firms are suitably prepared for the changes.
Andrew Stevens, from services company Quadient, said that many banks were still failing to effectively communicate with customers. For example, its research suggested that only 8% of consumers could fully understand updated overdraft charges.
Eric Leenders, managing director of personal finance at UK Finance which represents the banks, said he believed the changes would be more “evolution, not revolution”.
“Some changes will already be evident, others I’m sure consumers will see in the months and years ahead,” he told the BBC.
Mortgage help
The advertising campaign launched by lenders on Monday for those struggling with mortgage repayments will flag up measures such extending mortgage terms or switching to interest-only repayments temporarily.
Mortgage holders with variable or tracker mortgages have seen their monthly payments soar in recent months. While most homeowners with fixed-rate deals have been shielded by rate rises, people looking to renew, along with first-time buyers, have been met with much pricier deals.
UK Finance, which represents banks, said its “Reach Out” ad campaign aimed to encourage people to contact their “lender early on if they are worried about making their payments”.
In the year to January 2023, UK Finance said lenders helped more than 200,000 borrowers who were unable to meet their full mortgage payments.
