Some of the UK’s biggest banks and building societies have been accused of offering “measly” savings rates to loyal customers.
A group of cross-party MPs found that a “loyalty penalty” was especially prominent for elderly and vulnerable consumers who could not so easily shop around.
The Treasury Committee recently scrutinised Britain’s “big four” retail banks – Barclays, Lloyds, NatWest and HSBC – over why their savings rates were much lower than the Bank of England’s base interest rate.
The Bank hiked the UK’s base rate to 4.5% last month. Yet the big four offer rates between 0.7% and 1.35% for easy access savings accounts.
The committee found that the lenders could be relying on customer inertia to keep savings rates low.
The MPs widened their analysis by questioning Nationwide, Santander, TSB and Virgin Money over their easy access savings accounts.
Debbie Crosbie, chief executive of Nationwide, said that fixed-term savings accounts tended to have higher rates than instant access accounts.
“Generally, the longer that deposits can be left, the higher the rate,” she explained.
This was because fixed-term deposits offered more “certainty and stability” for banks, whereas instant access funds could not be so easily converted to lend to mortgage borrowers.
Mike Regnier, Santander’s chief executive, argued that the base rate was not the only factor when determining interest rates, and that the bank needed to balance pricing against all of its funding and service costs.
Meanwhile, Virgin Money’s everyday saver had a rate of 0.25%. The bank said in response that the account had different features to a normal savings account, did not “typically attract customers with high balances”, and represented just 0.3% of the savings accounts opened in the last six months.
But MP Harriett Baldwin, chair of the Treasury Committee, said banks still needed to “up their game”.
She said: “With the Bank of England confirming the pass through of base rate increases to easy access savings accounts has been unusually weak, it’s clearer than ever that the nation’s biggest banks need to up their game and encourage saving.
“While other products are available to those who shop around, the measly easy access rates on offer lead us to conclude that loyal customers are being squeezed to bolster bank profit margins.
“We remain concerned that the loyalty penalty is especially prominent for elderly and vulnerable customers who may still rely on high street bank branches.”