Wednesday, March 22, 2023
DIGESTWIRE
Contribute
CONTACT US
  • Home
  • World
  • UK
  • US
  • Breaking News
  • Technology
  • Entertainment
  • Health Care
  • Business
  • Sports
    • Sports
    • Cricket
    • Football
  • Defense
  • Crypto
    • Crypto News
    • Crypto Calculator
    • Coins Marketcap
    • Top Gainers and Loser of the day
    • Crypto Exchanges
  • Politics
  • Opinion
No Result
View All Result
  • Home
  • World
  • UK
  • US
  • Breaking News
  • Technology
  • Entertainment
  • Health Care
  • Business
  • Sports
    • Sports
    • Cricket
    • Football
  • Defense
  • Crypto
    • Crypto News
    • Crypto Calculator
    • Coins Marketcap
    • Top Gainers and Loser of the day
    • Crypto Exchanges
  • Politics
  • Opinion
No Result
View All Result
DIGESTWIRE
No Result
View All Result
Home Business

Age-old complaint about savings rates is down to you rather than bank bosses

DigestWire member by DigestWire member
February 6, 2023
in Business
0
Age-old complaint about savings rates is down to you rather than bank bosses
74
SHARES
1.2k
VIEWS
Share on FacebookShare on Twitter

The bosses of Britain’s leading commercial banks – Barclays, NatWest, HSBC and Lloyds Banking Group – appear before the Treasury select committee of MPs on Tuesday.

You might also like

Covent Garden-owner Shaftesbury Capital faces bruising pay row

Fever-Tree to raise prices as shoppers move to ‘budget-friendly’ options

Shock inflation surge means interest rate rise is nailed on

They face questions on a range of issues including branch closures, the mortgage market and the government’s proposed reforms to financial regulation that were unveiled just before Christmas.

Potentially the stickiest questions they face, though, will be on the question of whether they are passing on to savers the increases in interest rates made over the past 14 months by the Bank of England – taking Bank Rate, its policy rate, from the record low of 0.1% to 4% as of last Thursday.

As the Committee noted: “Customers of Barclays, HSBC, Lloyds Banking Group and NatWest Group can expect to earn between 0.5% and 0.65% interest on basic savings accounts.

“MPs on the cross-party committee will ask why these rates are so low, and whether banks can be doing more to advise customers on how to arrange their funds to maximise the return they receive.”

The committee has, apparently, been motivated by a deluge of complaints to politicians from constituents that the banks have not been passing on the benefits of higher interest rates to savers.

Those complaints, according to the independent research, monitoring and price comparison service Moneyfacts, appear justified.

It noted last week that, while interest rates on variable savings accounts had risen and that several providers had “improved their offers since the start of 2023”, the best savings rates were being offered by the challenger banks and building societies rather than by the established commercial banks.

Moneyfacts added: “Savers who fail to review their existing account to the latest top rates may miss out.

“Loyalty does not always pay, and the majority of the biggest high street banks have failed to pass every Bank of England base rate rise to easy access accounts, with two brands passing on just 0.54% since December 2021.”

Please use Chrome browser for a more accessible video player

Before the latest increase from the Bank of England, on Thursday last week, Moneyfacts published figures suggesting the average easy access savings account was paying an interest rate of 1.54% – up from 0.2% at the beginning of December 2021. During the same period, Bank rate rose from 0.1% to 3.5%.

So why the inertia? The first point to make is that the banks are under no obligation to pass on the full extent of increases in Bank rate to savers.

Near-zero interest rates of the kind the UK had from 2009 to 2021 had a crushing impact on net interest margins – the spread between what borrowers are charged and depositors are paid – and so the banks will be looking to rebuild profits after a decade in which they have been under intense pressure.

A second key factor is that the banks also know a lot of their customers do not trust some of the challenger banks offering more competitive rates and, accordingly, trade off that inertia.

Savers are, in effect, paying a safety premium for keeping their money with a trusted name like Barclays or NatWest than with a bank of which they may never have heard.

That, incidentally, is completely rational. Many will recall how, during the financial crisis, savers who had opened deposit accounts with the little-known Icesave, attracted by its market-beating rates, faced months of uncertainty when it collapsed in 2008.

In addition, many of the best savings rates are to be found with online-only providers, who often require savers to have a smartphone app. That may not suit some older or less tech-savvy savers.

Some politicians highlight the way that the banks have been quick to pass on the increases in Bank rate to mortgage customers.

Why, they ask, do the banks not pass on those increases to savers in the same way? The answer is because there is no link between the savings market and the mortgage market. The pricing of both is down to individual banks based on conditions in the market. And it is a fact that mortgage borrowers are more inclined to shop around in search of a better rate than savers are.

Another factor to bear in mind is that the banks do not exactly have to rush to raise money from depositors at present.

The banks have plenty of ‘liquidity’ at the moment – in other words they have plenty of ability to meet their financial obligations, as they fall due, via cash holdings or other instruments, such as short-dated bonds. They simply do not need to chase deposits.

It is also worth noting that this is not just a UK phenomenon.

The European Central Bank began raising interest rates in July last year and, with its latest hike coming last Thursday, it has taken rates from -0.5% to 2.5%.

Not all lenders in the eurozone have been passing on those increases to customers and there has been particular unhappiness in Spain, where as of December, average returns on one year deposits stood at 0.42% against a eurozone average of 1.34%.

Read more:
Britishvolt secures new life as preferred bidder is selected
Bank of England rate-setter urges more hikes to avoid ‘policy boogie’

Further afield, Australia’s finance minister has just indicated he will be instructing the country’s competition watchdog to investigate the savings account market, where again rates have not kept up with the official rate.

From May to December last year, the Reserve Bank of Australia took its main policy rate from 0.1% to 3.1%, a 3 percentage point increase. The average savings rate has risen by just 1.82 percentage points in that time.

Unhappiness at the refusal of deposit-takers to pass onto savers the full extent of interest rate rises is not new. In 1998, the then-Chancellor, Gordon Brown, commissioned Don Cruickshank, the former telecoms regulator, to carry out a review of banking services in the UK.

Mr Cruickshank’s report, when it was published in March 2000, concluded that UK banking customers – both personal and business – were overpaying by between £3-£5bn per year and, for personal customers, he identified three product areas – credit cards, savings accounts and personal loans – as being particularly problematic.

His report did, undoubtedly, lead to some improvements. It became far easier to switch current accounts while the speed at which money is transferred from one account to another increased dramatically.

Yet the complaints made today about savings rates remain similar to the ones made 25 years ago.

Mr Cruickshank uncovered, during the course of his research, that the average person keeps the same savings account for almost 10 years – while only 18% of savers knew exactly what rate of interest they were receiving.

It seems little has changed in terms of customer inertia and, until it does, that minority of savers who actually do know how much interest they are receiving are likely to carry on feeling badly done by.

Read Entire Article
Tags: BusinessSkynews
Share30Tweet19
DigestWire member

DigestWire member

Recommended For You

Covent Garden-owner Shaftesbury Capital faces bruising pay row
Business

Covent Garden-owner Shaftesbury Capital faces bruising pay row

March 22, 2023
Fever-Tree to raise prices as shoppers move to ‘budget-friendly’ options
Business

Fever-Tree to raise prices as shoppers move to ‘budget-friendly’ options

March 22, 2023
Shock inflation surge means interest rate rise is nailed on
Business

Shock inflation surge means interest rate rise is nailed on

March 22, 2023
Next Post
NHS walkouts ‘badge of shame for government’, says Starmer

NHS walkouts 'badge of shame for government', says Starmer

Woman arrested after three children stabbed in Huddersfield

Woman arrested after three children stabbed in Huddersfield

This gorgeous male bobcat marks his territory while searching for a mate

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

Recommended

We need app store competition, not Apple’s 1960s-style paternalistic monopoly

We need app store competition, not Apple’s 1960s-style paternalistic monopoly

11 months ago

The Beatles And John Lennon Music Memorabilia To Be Sold As NFTs

1 year ago
Everything Love Is Blind’s Deepti and Shake Said About Their Messy Split

Everything Love Is Blind’s Deepti and Shake Said About Their Messy Split

1 year ago
UQUID Partners with Binance Pay To Deliver Millions Of Products To Crypto Users

UQUID Partners with Binance Pay To Deliver Millions Of Products To Crypto Users

1 year ago

Categories

  • Blockchain
  • Breaking News
  • Business
  • Cricket
  • Crypto Market
  • Cryptocurrency
  • Defense
  • Entertainment
  • Football
  • Health Care
  • Opinion
  • Politics
  • Sports
  • Strange
  • Technology
  • UK News
  • US News
  • World

Topics

101greatgoals Bangordailynews Bitcoin Bitcoinist Bitcoinmagazine Blockchain Blockonomi Breaking News Business BuzzFeed Celebrity News Coin Surges Cointelegraph Cricket Cryptoslate Defense Entertainment espncricinfo Health Care insidebitcoins newsbtc Opinion Politico Skynews Sports Strange Techcrunch Technology UK US USMagazine Variety World WSJ - Wall Street Journal
No Result
View All Result

Highlights

‘Red Band Society’ Stars Joana and Mireia Vilapuig on Sibling Drama ‘Selftape’

Tilda Swinton’s ‘The Eternal Daughter’ Acquired for U.K., Ireland Distribution by BFI – Global Bulletin

Lisa Joy Says Writers’ Guild Is Acting for ‘Collective Good’ in Potential Strike, Details Why ‘Westworld’ is Even ‘More Relevant’ Today

Wim Wenders Tells Young Filmmakers: ‘Trust in a Place Is Something That Can Give You Wings’

Amazon’s palm-reading payment tech is coming to Panera Bread

F3C puts its investment spin on consumer brands with new $25M fund

Trending

Fleming to coach Texas Super Kings in USA’s Major League Cricket
Cricket

Fleming to coach Texas Super Kings in USA’s Major League Cricket

by DigestWire member
March 22, 2023
0

Fleming is now the head coach at all three CSK teams, in the IPL, at the SA20,...

Kane Williamson and Mitchell Starc in the top three in ICC rankings

Kane Williamson and Mitchell Starc in the top three in ICC rankings

March 22, 2023
Megan Fox and Machine Gun Kelly Are ‘On a Break,’ Stalling Wedding Plans

Megan Fox and Machine Gun Kelly Are ‘On a Break,’ Stalling Wedding Plans

March 22, 2023
‘Red Band Society’ Stars Joana and Mireia Vilapuig on Sibling Drama ‘Selftape’

‘Red Band Society’ Stars Joana and Mireia Vilapuig on Sibling Drama ‘Selftape’

March 22, 2023
Tilda Swinton’s ‘The Eternal Daughter’ Acquired for U.K., Ireland Distribution by BFI – Global Bulletin

Tilda Swinton’s ‘The Eternal Daughter’ Acquired for U.K., Ireland Distribution by BFI – Global Bulletin

March 22, 2023
DIGEST WIRE

DigestWire is an automated news feed that utilizes AI technology to gather information from sources with varying perspectives. This allows users to gain a comprehensive understanding of different arguments and make informed decisions. DigestWire is dedicated to serving the public interest and upholding democratic values.

Privacy Policy     Terms and Conditions

Recent News

  • Fleming to coach Texas Super Kings in USA’s Major League Cricket March 22, 2023
  • Kane Williamson and Mitchell Starc in the top three in ICC rankings March 22, 2023
  • Megan Fox and Machine Gun Kelly Are ‘On a Break,’ Stalling Wedding Plans March 22, 2023

Categories

  • Blockchain
  • Breaking News
  • Business
  • Cricket
  • Crypto Market
  • Cryptocurrency
  • Defense
  • Entertainment
  • Football
  • Health Care
  • Opinion
  • Politics
  • Sports
  • Strange
  • Technology
  • UK News
  • US News
  • World

© 2020-23 Digest Wire. All rights belong to their respective owners.

No Result
View All Result
  • Home
  • World
  • UK
  • US
  • Breaking News
  • Technology
  • Entertainment
  • Health Care
  • Business
  • Sports
    • Sports
    • Cricket
    • Football
  • Defense
  • Crypto
    • Crypto News
    • Crypto Calculator
    • Blockchain
    • Coins Marketcap
    • Top Gainers and Loser of the day
    • Crypto Exchanges
  • Politics
  • Opinion
  • Strange
  • Contribute!

© 2023 Digest Wire - All right reserved.

Privacy Policy   Terms and Conditions

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.