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Banks not acting promptly to pass on increase rate hike to savers

Journalist: Sarah O'Grady, The Daily Express

ended 05. August 2022

The Bank of England has now raised the base rate six times in recent months but banks and building societies have been slow to pass on the rise to savers. Many of these savers are pensioners on fixed incomes who have struggled with record low interest rates and rising inflation over the last few years. At the time of writing (Friday 5th) only Santander and Newcastle BS have moved in the wake of yesterday's BofE decision and raised their savings rates. However not until mid-Aug for Santander savers and not until end of Aug for Newcastle savers. I'm looking for quotes which mention how important it is that banks play fair with savers and pass on the rate rise onto savers as quickly as they pass it on to mortgage customers.

8 responses from the Newspage community

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Graham Wells
Founder and Financial Coach at GroWiser Financial Coaching
I started work in one of the big banks over 30 years ago, straight from school. As far back as I remember, interest rate rises have always been slow to benefit savers, but remarkably quick to sting borrowers. In reality, it's borrowers who will really feel the negative impact in situations like this, so waiting a few weeks for an extra 0.5% on your savings will barely be noticed by most people. For me, it's more a point of principle and fairness. If a financial organisation chooses to penalise more quickly than it chooses to reward, is that the type of company you want to look after your money? If not, it's easier than ever to vote with a click of your mouse button, and transfer your business elsewhere.
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Rob Peters
Principal at Simple Fast Mortgage
Having personally worked as a independent consultant correcting past customer disasters within all the high street banks, this is comes as no surprise. Unfortunately, a bank's rates are set by the bank, and are not directly correlated to the Bank of England rate. This basically means banks can do what they want with little to no repercussions. Bank interest rates both for savers and borrowers are also forwarded priced, based on future market expectations. Not what is happening now. Banks primarily use their rates to control the level of business they receive. No one bank could cope with having all the savings or mortgage business all of the time. Crucially, not all banks are the same. Yorkshire Building Society is offering 5% on their one year variable savings account. First Direct have a 3.5% savings product and RBS and NatWest have one at 3.3%. Saver and borrowers alike should shop around or speak to an adviser.
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Scott Gallacher
Director at Rowley Turton
I'd like to say I'm surprised, but to be honest, the banks have been taking advantage of their customers for years. So, I'm not surprised at all. Whether it is the billions languishing in accounts paying almost zero interest, or the PPI miss-selling scandal, the banks' business model seems to built on treating customers unfairly. The good news is, as my colleague said, at least the banks are consistent.
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Stuart Powell
Managing Director at Advice Guru
All banks make huge profits by lending money at the highest rate they can and giving savers the lowest rate possible. Banks have never passed on Bank of England base rate increases quickly but are super quick to raise mortgage rates, usually on the first day of the following month. If one bank were to break this mould and increase their savings rates on the first of the following month by the same amount as the Bank of England change, they would likely gain huge numbers of new customers and keep their existing ones happy.
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Adrian Kidd
Chartered Wealth Manager at EQ Financial Planning
I've said this a lot in last 24 hours but what is the point of the Bank of England saying they are "monitoring" this dynamic when it is clearly working against the consumer? I thought regulation and regulators were supposed to be pro-consumer? As a regulated adviser, I can honestly say that regulation is failing all participants and that the Bank of England and FCA need to take action, not simply monitor the situation. I get banks can do what they want but what about doing the right thing for a change?
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Graham Cox
Director at Bridging Hub
Savers have received pitiful amounts of interest for years. There really is no excuse for delays in improving their rates when the base rate goes up. After all, they're quick enough to put mortgage rates up. Perhaps regulation is required to ensure banks and building societies adjust savings rates and mortgage rates simultaneously.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Banks have a duty to treat customers fairly. Not only is it right and proper to pass on the base rate changes promptly, but it is also commercially sensible. Customers will switch to banks that are being honest with customers. Savers have had a terrible decade and banks have, too. But as interest rates increase it’s easier for banks to make a profit, so they shouldn’t be treating their customers in this way.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
The big guys (the banks) need to start treating the little guys (the 60+ million people in the UK) with a bit more respect. In 2022, their systems should be sophisticated enough to pass on the rate rises to savers immediately. There are a lot people in this country who rely on the banks and it is time the banks recognise this and treat them with the respect they deserve. I was pleased to see the small gesture from Santander, who are doubling the cashback to customers on energy bills for the next couple of months. Whilst there is a lot more they could do, it is a step in the right direction.