Saturday 13th July 2024

Are banks ripping off savers? Time to shop around for a better rate

If you’re a regular saver, you’ll have noticed that savings rates are much higher than they used to be.

It means after years of pitifully low savings rates, savers can once again make relatively decent returns on their money.

That is because the Bank of England (BoE) has hiked base rate – the UK’s most important interest rate – by 4.15 percentage points to a 14-year high of 4.25% over the past 15 months.

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When interest rates rise, the rates on loans tend to rise, meaning borrowing becomes more expensive. But, on the upside, savers get higher rates of interest on their cash – in theory.

However, while banks are hitting borrowers with higher borrowing costs, they have been slower to pass on rate rises to savers.

For example, over the past year base rate has increased by 3.5 percentage points.

However, according to data firm Moneyfactscompare.com, the average easy access savings rate has risen by just 1.6 percentage points.

Over the same period, the average two-year fixed rate mortgage has rocketed by 2.67 percentage points, the firm’s data shows.

Banks are not obliged to pass on interest rate rises in full to savers. However, Unite, the trade union, accuses banks of ‘pickpocketing’ their customers by not doing so.

The trade union claims the big four UK banks – Barclays, HSBC, Lloyds and NatWest – have already made an extra £7bn profit from rising interest rates.

The banks have made this extra money by raising interest rates for borrowers and not passing on rate rises in full to savers, it says.

Unite’s general secretary Sharon Graham hasn’t minced her words about the situation, either.

She says: “The banks have already made billions in extra profit from interest rate rises. If the [Bank of England’s Monetary Policy Committee] raises rates again they stand to gain even more. Banks treat these rises as a licence to pick the pockets of householders across Britain.”

There is no doubt that banks are coming under increased scrutiny on this issue. The Big 4 banks have all been hauled in front of The Treasury Select Committee (TSC) this year to explain themselves.

Meanwhile, the TSC has written to City regulator to ask whether banks are making disproportionate profits from dragging their heels on savings rates.

Here at Mouthy Money, we will be watching carefully. Too many banks have no interest in being fair or transparent and that simply isn’t good enough.

In the meantime, don’t accept sub-par savings rates. Shop around to find a better deal for your savings using a savings comparison site.

Photo Credits: Unsplash

Undercover Money Reporter

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