Banks have raised mortgage rates twice as much as they have increased their interest payments to savers
- avgThe mortgage interest deduction with a term of two years has increased to 6.63% since December 2021
Banks have raised mortgage rates twice as much as the increase in interest paid to depositors, data shows.
The average two-year, fixed-rate mortgage offered by lenders has increased by 4.29 percentage points since December 2021.
But savers with easy access accounts have only seen a 2.33 percentage point increase over the same period, according to research from the House of Commons Library.
It has resulted in homeowners with an average outstanding loan balance paying an extra £2,575 a year – but those with normal levels of savings only received £128 a year more in interest.
The figures come weeks after senior MPs and the financial regulator demanded that banks pass on any rate hikes from the Bank of England to savers.
Banks have raised mortgage rates twice as much as the increase in interest paid to depositors, data shows (File image)
In December 2021, when the bank’s base rate was 0.1 percent, major banks offered 0.2 percent to savers and 2.34 percent to savers with a two-year fixed-rate mortgage.
This savings rate rose to just 2.53 per cent in July this year, giving the average saver with £5,500 in their account an extra £128 a year.
But the average two-year fixed-rate mortgage has risen to 6.63 per cent since December 2021, costing a borrower with an average £98,000 outstanding mortgage a total of £10,328 a year, up from £7,575 previously.
Liberal Democrat MP Wera Hobhouse, who commissioned the study, said: ‘It is shameful that big banks are paying people peanuts out of their hard-earned savings while increasing mortgage bills by thousands of pounds a year.
“People work tirelessly all their lives to be able to save and take care of the kids or build a nest egg for a rainy day. Making matters worse, the savings rate has hardly increased as households grapple with the cost-of-living crisis.
“Banks are making a fortune by short-selling depositors and the government has been far too slow to take action. The least Conservative ministers should be doing is making banks pay their fair share by undoing the billions in tax cuts they have given since 2016.”
MPs from across the House of Representatives called on major lenders to do their duty to loyal savers.
The average two-year fixed-rate mortgage offered by lenders has increased by 4.29 percentage points since December 2021 (File image)
Conservative MP Harriett Baldwin, chairman of the Treasury committee, said: ‘As a committee we have been questioning the big banks all year about their poor savings rates and it is clear that savers have been getting a rough deal for too long. While it is good to hear that the banks are acknowledging that further action is needed, it is time to see an acceleration underway.
“We will monitor developments closely and will be particularly alert to apparent foot-dragging.”
Last month, CEOs of HSBC, NatWest, Lloyds and Barclays were dragged before the Treasury Committee on charges that they profited from rate hikes.
HSBC came under scrutiny earlier this month after pre-tax profits more than doubled to £16.9bn in the first half of this year.
The Financial Conduct Authority has given banks until the end of the month to justify the low savings rates and explain how they represent fair value to customers.
A NatWest spokesperson said: “We are constantly keeping our products in line with market conditions.” A spokesman for Barclays said: ‘Following the Bank of England’s decision to raise key rates, we will raise our rates on a number of savings products on 15 August and 1 September and will be able to provide more information in due course. .’
Pella Frost, from HSBC UK, said: ‘We are supporting our clients to get the most out of their money in a number of ways, such as increasing interest rates on our range of savings accounts.’
A spokesman for the Treasury Department said it had been clear to the Chancellor for some time that banks should pass higher interest rates on to depositors and that he met with regulators in June to raise the issue.
Britain’s lowest earners face an effective tax increase of more than £26bn in the next tax year as they risk being hit hardest by frozen benefits.
The lowest fifth of earners will see their effective tax rate rise 11 percentage points over the next three years — up to five times more than some higher earners, according to a report from the New Economics Foundation think tank.