As lenders come under fire for profiteering, the UK’s financial regulator has told Britain’s biggest banks that it wants faster progress in improving savings rates for their customers.
After a meeting on Thursday with senior bankers, the Financial Conduct Authority stated that “those present in the room recognized that they needed more to help consumers access the best rate”.
The watchdog stated that while banks have taken steps to improve the savings rate, they now want “to accelerate this progress”.
Sheldon Mills is the executive director of the FCA for Consumers and Competition. He met with senior executives from Barclays and Lloyds Banking Group as well as NatWest, HSBC and NatWest to discuss concerns about the soaring costs of mortgages.
Under rules on consumer duties that come into effect at the end July, the regulator will have greater powers to act against banks that are not providing “good outcomes” for customers. The FCA stated on Thursday that this includes savings rates.
The FCA said in a statement that was released after the meeting, “Many people feel the pinch from rising interest rates and price increases. It is therefore more important than ever to offer them fair and competitive savings rates.”
The watchdog stated that it “challenged companies where their decision-making has been slow” over the past months, such as when lenders made only minor increases to their variable rate saving products despite rising rates.
The Bank of England increased its interest rates by 5 percent last month. This triggered a surge in gilt yields, which are used to price mortgages. Moneyfacts reports that the average rate of a fixed-rate two-year mortgage is now 6.52 percent, which is the highest since October 31, last year. A two-year saving account’s average rate has reached 4,79 percent.
Consumer finance experts say that many people are hesitant to lock their money for a set term, especially during times of high prices and a cost-of-living crisis. Moneyfacts reported that the average interest rate for an easy-access saving account is 2.49 percent.
Harriett BALDER, the chair of the House of Commons Treasury Committee, stated that it was “clear” that savers had been treated unfairly for too long.
She continued: “While hearing the banks acknowledge that further action is needed, it’s now time for an acceleration of progress.” We will closely monitor the situation and be alert to any signs of a stall.
Before the gathering, bankers who attended the meeting stated that they would be discussing how to improve communication with customers about savings rates in order to ensure that they get the best deal.
A banker who was close to the discussion said, “It is a large conversation.” You wouldn’t send your chief executives to just anything. . . It’s not just a regular get-together. The FCA is doing a review on savings for the end July and HMT (the Treasury) seem to indicate that this may eventually turn into a Charter.”
One banker who was present at the meeting said that the topic of “inertia”, and the failure of consumers to switch accounts in order to benefit from better rates, had been discussed.
By the end of this month, the FCA will report on how it supports savers and the state of the savings market. The FCA will also require the largest lenders explain the rate of increase and the extent on interest rates for savings, and how they support customers to switch.
Angela Eagle of the Treasury Select Committee said this week that high street banks are “squeezing more profits out of their loyal saving customers”. She noted that “blatant profiteering is shocking.”