Atom Bank boss slams rivals for not raising interest rates for savers
Boss of British challenger bank Atom attacks ‘hand-wringing’ rivals for not raising interest rates for depositors
- Mark Mullen accused leading lenders of passing on as little as possible
- FCA urged Barclays and HSBC, among others, to raise rates for savers
- The chancellor said it took “too long” for savers to enjoy higher returns
The boss of a British challenger bank has attacked ‘hand-wringing’ rivals for failing to raise interest rates for depositors.
Mark Mullen, the CEO of Atom Bank, accused leading lenders of passing on as little as possible, fueling the “profit making” debate.
It comes after a crisis meeting between bank bosses and the Financial Conduct Authority this week, in which the regulator urged Barclays and HSBC, among others, to raise interest rates for depositors.
Wading in: Atom chief executive Mark Mullen (right) and Chancellor Jeremy Hunt
Rapidly rising interest rates from the Bank of England have led to higher mortgage payments. But the savings rate has not risen nearly as quickly.
The average two-year fixed mortgage rate is now over 6.5 per cent, while the average easy savings rate on £10,000 is just 2.49 per cent.
Chancellor Jeremy Hunt recently said it was taking ‘too long’ for depositors to enjoy higher returns, while the Commons Treasury Committee urged banks to ‘up their game’.
Mullen has now also intervened. “It drives me crazy when hand-wringing bankers talk about supporting customers but don’t pass rate hikes on to savers,” he told the Mail.
“Savers have had a pretty rough time since the global financial crisis and interest rates are low through no fault of their own.
“You get to a point where you have this perfect storm of high inflation and rate hikes. What do the banks do? They sit on their hands and pass on as little as possible to the people who actually finance their growth.’
Mullen said banks used higher rates to boost profits rather than help customers. Much of the controversy revolves around banks’ “net interest margin” – the difference between what lenders charge borrowers and depositors pay.
Rate hikes: UK interest rates have been raised by the Bank of England to 5%
The Atom chief, who held several senior positions at HSBC before his departure in 2014, dismisses the notion that larger banks cannot act as quickly in passing on rates due to their size.
“I spent 24 years of my life in big banking,” he said. ‘I know the game. And I left the establishment because I don’t like playing.
“It has nothing to do with agility or pace at all. It has to do with enjoying widening spreads.’
Mullen said lenders “benefited from an interest rate environment not of their own making,” but said it won’t improve their underlying business models.
Atom Bank offers customers 5.95 percent on a one-year fixed-rate savings account, compared to 4.95 percent at Lloyds and 5.55 percent at NatWest. Bank of England data shows that £250bn of customer money is held in accounts that do not pay interest.
The rampage over profits comes as savers face a growing tax bill. Rising interest rates are dragging even those with humble nest eggs over the threshold to pay taxes.
Interest on savings is tax-free up to a maximum of £1,000 per annum for taxpayers at the basic rate and £500 for those paying the higher rate.
When the personal savings deduction was introduced in 2016, a base rate taxpayer could hold around £70,000 and a higher rate taxpayer £35,000 without paying a penny of income tax on interest.
Today, a base rate taxpayer needs around £20,000 – or £10,000 for a higher rate payer – to get hit. As a result, savers will pay £6.6bn in tax on the interest this year, compared to £3.4bn last year and £1.2bn in 2021.