For years, this country’s stoic army of prudent savers has paid a heavy price for the disastrous mistakes of some high street banks, culminating in the near-apocalyptic financial crisis of 2008.
From 2008 to the end of 2021, a combination of ferocious rate cuts and the Bank of England printing billions of pounds (to support the economy) made saving as wealth-boosting as investing in a dodgy Los Timeshare owned by Cristianos in Tenerife.
The banks didn’t want or need our money as savers – they could borrow it at rock bottom prices in the wholesale money markets – so they offered us peanuts interest. They recovered, we collided.
‘Like it or lump it’ was their message. Most of us chose to like it. Why? A sense of loyalty to our bank? Maybe. But more likely because caution is instilled in our financial DNA.
Pale rates: Barclays and Santander pay 0.85%, while Lloyds and NatWest pay a minimum of 0.9% and 1.11% respectively on easily accessible accounts
Today, despite a new era of higher interest rates in which bank rates have risen from 0.1 percent to 5 percent in the space of 18 months, we savers are still being beaten upside down by the profit-laden spades of the big banks .
Yes, savings rates have improved, but not by the amount they should have.
It’s a shocking turn of events, a betrayal – and one that the Mail has consistently highlighted since December 2021, when the interest rate worm started turning.
A year and a half ago, in The Mail on Sunday, I called on the ‘stingy banks to pay … and reward savers now’.
Two months later, we warned of the ‘brutal bank robbery’ of depositors.
At the end of last year, we exposed the widening gap between interest rates on loans and savings and the resulting profits that banks made, mainly at the expense of savers.
In March this year, Money Mail revealed that one bank even refused to pass on rate hikes unless customers called and asked.
Unfortunately, the government has only NOW realized that the banks have not played fair with the money of the savers all this time.
And that bank dishonesty has contributed in part to the inflationary fire that is currently burning a hole in household finances and threatening the health of the UK economy.
This is because suppressed savings rates reduce the tendency of some households to put money aside for the future – and implicitly encourages them to spend more.
The exact opposite of what the government and the Bank of England want in their attempt to curb inflation.
Chancellor Jeremy Hunt told the Commons this week that he had warned the bosses of the big banks that they would face regulatory action if they did not start charging higher interest rates to depositors.
Shortly changed: savers continue to be hit on the head by the profit-laden spades of the big banks as they refuse to pass on the benefits of rate hikes
He said it took far “too long” for savers to take advantage of higher interest rates, especially those with instant access savings accounts.
He added: “I raised that issue with the banks when I met them and I’m working on a solution because it’s a problem that needs to be solved.”
His comments were supported by Downing Street. It read: ‘We absolutely expect banks to pass higher rates on to depositors, and we are working closely with the Financial Conduct Authority. [the City regulator]which we know they are watching closely.”
The evidence of the banks dragging along when it comes to passing on higher rates to savers is irrefutable.
Yesterday we asked Anna Bowes of rate controller Savings Champion to look at the rates being paid by the big banks on the instant access savings accounts the Chancellor was referring to – both now and in December 2021, just before the bank rate hike of 0, 1 percent to 0.25 percent.
In 2021, Barclays, HSBC, Lloyds and Santander all paid 0.01 per cent interest on instant access accounts – a paltry £1 a year on £10,000 in savings. Inflation was then 7.4 percent.
Today, with a bank rate of 5 percent, Barclays and Santander pay a miserable 0.85 percent, while Lloyds and NatWest pay slightly more – a minimum of 0.9 percent and 1.11 percent, respectively.
HSBC has done more, with customers currently receiving 1.35 percent. The bank is expected to raise savings rates again in the coming days. Inflation today stands at 8.7 percent.
Mrs Bowes is not shy in her criticism of the banks. She bellowed, “It is absolutely right that the banks should be told to break their ideas and treat depositors fairly.”
Still, she believes threats from Mr. Hunt probably won’t be enough. She would like the banks to be instructed by the regulator to tell depositors in these moribund accounts that they can make much more by transferring their money elsewhere – some rival easy access accounts pay 4 percent plus.
“Many loyal depositors feel that their High Street bank pays a fair rate,” she added. “This is just not the case.”
With the new consumer tax rules coming into effect at the end of July, the FCA could require banks to do exactly what Ms. Bowes asks for.
Damage: Banks’ greed has contributed in part to the inflationary fire that is currently burning a hole in household finances and threatening the health of the UK economy
Or it could impose tougher sanctions on the banks if it believes depositors’ loyalty is being abused – in the same way insurance companies took advantage of their loyal policyholders by charging them higher premiums than new customers (new FCA rules prohibit this now).
Like Hunt, consumer advocate Baroness Altmann believes that the more people choose to save rather than spend, the easier it will be to beat inflation.
But with banks failing to pass on the benefit of higher interest rates to depositors, she fears some people will be tempted to do the opposite: spend money instead of keeping money in the bank.
For the record, Baroness Altmann said she was pleased that the campaign for better savings rates by both Money Mail and The Mail on Sunday had been ‘heard’ by Mr Hunt.
Yesterday, I asked the big five banks for comment on the threat of regulatory action if they didn’t start passing higher rates on to depositors. Only HSBC and Santander responded. The others kept their mouths shut. Says it all really.
Santander was skeptical, saying it took “many factors” into account when determining the savings rate. It added: “When making pricing decisions, we want to make sure we provide the level of investment in our services that customers expect.” What?
HSBC said every savings product it offers has seen its interest rate rise. It also said it was committed to “supporting customers” by encouraging them to “start a positive saving habit and save for longer-term goals.”
Fine words, although 1.35 per cent is hardly worth singing about from the roof of the soon-to-be decommissioned headquarters in London’s Canary Wharf.
Still, encouraging positive savings habits is what all banks should be doing – and that can only be achieved by paying better rates.
Savers earn better, so much better. We said that 18 months ago. And we say that TODAY.
Unless banks stretch their fingers and start raising rates immediately, the regulator should crack down and hit them with hefty fines.
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