Reviving the Savings Spirit: Bank Chiefs Summoned to Account for Low Returns

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Bank Chiefs (Parliament Politic Magazine) – Bank executives have been called upon by the UK’s financial regulator due to concerns that interest rates on savings accounts are excessively low. While mortgage costs have surged in response to higher interest rates, savings rates have not increased at the same pace. Chancellor Jeremy Hunt recognizes this as a pressing issue, particularly as many households are grappling with the escalating cost of living.

The leaders of prominent banks including Lloyds, HSBC, NatWest, and Barclays will convene with the Financial Conduct Authority (FCA) on Thursday. During this meeting, the FCA will address the banks’ savings rates and their communication practices with customers.

HSBC has recently revealed a remarkable increase in its savings rates, having raised them more than a dozen times since the beginning of last year. This commendable effort has been extended to all of HSBC’s savings products, with rates being enhanced on multiple occasions throughout this period.

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Barclays has refrained from commenting on the specific meeting. Nevertheless, the bank has emphasized its commitment to regularly reviewing and adjusting its savings rates to ensure optimal benefits for its customers.

The Bank of England has been gradually raising interest rates in the UK since December 2021 in an effort to combat surging inflation. Previously near zero, the base rate, which directly impacts mortgage and savings rates, now stands at 5%.

The objective of the Bank is to increase the cost of borrowing, while simultaneously encouraging saving. The underlying idea is that individuals will be inclined to spend less, leading to a moderation in price hikes. By implementing these measures, the Bank of England aims to strike a balance between curbing inflation and promoting responsible financial behavior.

However, despite the recent surge in average mortgage rates, the increase in returns on savings and current accounts has been significantly smaller. As of Tuesday, the average rate for a two-year mortgage deal reached a staggering 6.47%, whereas the average rate for easy access savings stood at a mere 2.45%.

This marked a substantial gap of 4.02 percentage points between the two. Furthermore, the average rate for a one-year fixed savings account was recorded at 4.8%.

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Banks’ profits typically increase in tandem with interest rates, although lenders contend that savers have access to a wide range of competitive offers.

UK Finance, the industry association for the banking sector, has previously stated that savings and mortgage rates are not directly correlated and therefore fluctuate at different times and to varying degrees.

Nevertheless, the chancellor has expressed concern that banks are taking too long to pass on interest rate hikes to savers and has discussed this issue with chief executives, who faced questions from MPs in February.

The Financial Conduct Authority (FCA) has announced its intention to release a report by the end of the month, evaluating the effectiveness of the cash savings market in supporting savers.

By summoning bank executives, the FCA is taking a proactive approach to address this issue and seek a fair resolution that benefits both customers and the banking industry as a whole.

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UK Bank Bosses Have Been Summoned For A Meeting To Discuss Low-Interest Rates

UK bank executives have been called to a meeting with the financial watchdog this week due to growing concerns that they are taking advantage of increasing interest rates by providing meager savings rates to their customers.

Top officials from major high street banks such as Lloyds Banking Group, NatWest, HSBC, and Barclays, along with representatives from smaller lenders, are expected to attend a meeting at the Financial Conduct Authority (FCA) on Thursday. The purpose of this gathering is to address worries that savings rates are significantly trailing behind the skyrocketing costs of mortgages and loans.

This meeting serves as an opportunity for the financial watchdog to engage with bank bosses and discuss the pressing issue of unfair savings rates. The concern is that while interest rates are on the rise, banks are not passing on the benefits to their customers. This has resulted in a significant disparity between what banks charge for loans and mortgages and what they offer in terms of savings rates.

Beth Malcolm

Beth Malcolm is Scottish based Journalist at Heriot-Watt University studying French and British Sign Language. She is originally from the north west of England but is living in Edinburgh to complete her studies.