The City regulator has revealed that it is seeking answers from banks about how they decide on savings rates amid complaints they are failing to reflect the surge in the Bank of England’s base rate.
The Financial Conduct Authority’s executive director for competition and consumers Sheldon Mills also told a conference that it was investigating banks for failing to do enough to help customers struggling during the cost of living crisis.
He warned of the possibility of intervention ahead without shifts in attitudes across the sector.
“We have identified 30 firms that need to do more to help struggling customers and will investigate the activities of 40 more.”
The announcements follow hot on the heels of more noise from regulators about treatment of customers as the pace of inflation remains at a 40-year high, with bills for energy, food, fuel and other essentials among those worst hit.
The watchdog revealed earlier on Thursday that it had told the insurance sector to behave itself, given the squeeze on family budgets.
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“The FCA is taking action to support households, by writing to insurance industry CEOs to make sure their customers are protected from unnecessary products or add-ons and unfair penalties,” it said in a statement.
“Where poor practise is found, the FCA will quickly intervene to protect customers from harm,” it added.
The Bank of England has raised the base rate of interest consistently since December last year, when it had stood at 0.1%.
Action to help tame inflation has seen Bank rate leap to 2.25% since and financial markets now see that figure rising to 6% next year in the wake of the government’s mini-budget, which has placed policymakers in Threadneedle St on a collision course with Downing St.
That is because the Truss administration’s package is widely seen as inflationary in nature through the £45bn of tax giveaways contained within it to stoke economic growth.
As mortgage holders on tracker and standard variable rates have found out to their cost this year, successive increases in Bank rate aimed at tackling inflation have been passed on to borrowers – with the mortgage market enduring turmoil at the moment through a temporary withdrawal of products because of the likely path for Bank rate ahead.
While fixed-rate deals are adjusted to account of these forecasts and wider financial market movements, seeing them shoot up in the process, savers have had a much tougher time of it – since the financial crisis of 2008 to be exact – because of rock bottom rates.
Savings rates, consumer experts have complained this year, have failed to match the pace of Bank rate rises.
However, it has been clear that competition has started to gather pace in recent weeks.
Moneyfacts reported on Thursday that the best easy access rate available on the market was 2.1% though 4% rates were widely available for fixed-term accounts.
But at those levels, they remain well below the annual rate of inflation – currently at 9.9%.