Banks ‘too slow’ to pass on higher interest rates to savers

Banks and building societies in the UK are “taking too long” to apply rising interest rates to savings accounts, according to the chancellor.

Speaking in the House of Commons, Jeremy Hunt said that the banks’ response to higher rates was particularly slow with instant access accounts. “The rates are more frequently being passed on to people who have fixed notice accounts,” he explained.

Hunt added that he had raised the issue in “no uncertain terms” with banks last week.

Labour’s Dame Angela Eagle, who served as a Treasury minister under Gordon Brown, called on the banks to stop “profiteering”.

She claimed that banks had made more than £4bn extra profit in the latest quarter due to paying out lower interest rates while charging borrowers close to the Bank of England base rate, Sky News reports.

According to Moneyfacts figures quoted by BBC News, the gap between average mortgage and savings rates is currently wider than it was in December 2021, when the Bank of England first starting increasing interest rates in an effort to tackle high inflation.

At that time, average pricing for a two-year fixed-rate mortgage deal was 2.38% and the average easy access savings rate (the most common type of savings account) was 0.19%, a gap of 2.19 percentage points.

On Monday, the average two-year mortgage deal had climbed to 6.23% and the savings rate was 2.36%, a gap of 3.87 points. However, the gap was even higher in December 2022, at 4.24 points.