Lenders are ‘filling their boots’ for new rules on rates
Banks have been accused of ‘filling their boots’ in anticipation of new rules designed to give savers a better deal.
Lenders are under fire for failing to implement a series of rate hikes on savings accounts while driving up mortgage and other borrowing costs, leading to huge profits.
The top six lenders earned £44bn in net interest last year – the difference between what they pay to savers and what they charge to borrowers. That was £8 billion more than in 2021, when interest rates were close to zero.
The reference base rate – now 5 per cent – will go even higher as the Bank of England tries to curb inflation from 7.9 per cent.
Banks are on track to make more money this year, despite new “consumer tax” rules coming into effect this month to protect savers.
‘Filling their boots’: lenders under fire for failing to extend a series of rate hikes to savings accounts
“The banks have made profits at the expense of customers over the past year,” said James Daley of consumer campaign group Fairer Finance. “They know consumer duty won’t allow them to act like this in the future, so they fill their shoes while they still can.”
The new rules have been drawn up by the Financial Conduct Authority. The watchdog’s boss, Nikhil Rathi, told MPs last week they would require some banks to make “a significant cultural shift” to provide value to savers, but the FCA was not a price regulator, he said.
MPs noted that the four largest banks – Lloyds, NatWest, Barclays and HSBC – offer easy access savings accounts paying out 0.9 to 1.75 per cent – below the average of 2.62 per cent quoted by the website Moneyfacts.
Banks insist they have passed on 60 percent of the recent increases to savers. They also claim that they cannot notify customers of the best rates due to data protection laws.
But regulators reject this, saying rules about duty of care to consumers mean lenders can send neutral, factual information about getting higher rates, even to those who refrain from direct marketing.
“Even if banks give their loyal customers better bills, savers are likely to earn much more elsewhere,” says Anna Bowes of the Savings Champion website.
Harriett Baldwin, chair of the Treasury Select Committee that examines banks, said: “The time for flimsy excuses is over. We will continue to monitor it closely, especially when banks report semi-annual figures.’
Lloyds is expected to post a first-half profit of £2.9 billion on Wednesday. Two days later, NatWest – owner of Coutts’ private bank – will declare a profit of £2.4bn.