Another Monetary Policy Committee (MPC) meeting and another base rate rise, this time by 0.50% - so up to 4%, the highest level for 14 years.
The obvious good news for savers is that another base rate rise should mean another round of saving rate increases – certainly on variable rate savings accounts. But as ever, we know that not all hikes will be equal. And yes, I’m talking about the high street banks in particular.
Since the base rate started to rise back in December 2021, it has increased from 0.10% to 4% - so up 3.90%. But Santander and Barclays both have easy access savings accounts that have increased by a fraction of this – just 0.54% - as they are both still paying 0.55% AER to their long-suffering loyal customers.
Surprisingly the best of the bunch is HSBC which upped the rate on its Flexible Saver to 0.90% on the day of the base rate announcement, an overall increase since December 2021 of 0.89%.
This, quite frankly, shoddy behaviour that we have been calling out for years, has finally come to the attention of the Treasury Select Committee (TSC).
The TSC has requested that the bosses of Barclays, HSBC, Lloyds and NatWest appear at a hearing on Tuesday (7th February), to answer why they are not passing the rising interest rates on to their savings customers. We’ll wait to hear what excuses they will come up with, and what might be done about it - but we’ll keep you posted.
Perhaps the fact that the banks - which arguably hold the majority of savers cash - are paying such terrible rates, is one of the reasons that as a nation we have a savings problem. According to a recent study from the Resolution Foundation, an independent think tank, the UK has persistently had the lowest savings rate of any of the wealthy G7 nations, since the 1980s.
The current cost of living crisis has highlighted the problem
Between 2018 and 2020, 8% of the poorest 10% of families had no savings whatsoever (Source: Resolution Foundation analysis or ONS Wealth & Assets Survey) and this means they have had no financial resilience as rising inflation has bitten.
While it’s probably not a surprise to see that the lower income families have less savings, what is unnecessary is that the lower income families earn less on the savings they do have. This could be because they can’t afford to lock it away in order to earn better rates or it could simply be that they leave any excess cash then have in their current accounts earning very little, if anything at all.
But they aren’t the only ones. Although the figure is reducing, according to the Bank of England, there is still over £267 billion sitting in accounts paying no interest at all – up from £190 billion in March 2020 as Covid-19 started. With easy access rates now reaching as high as 3% AER, by leaving your cash in your current account you really are playing into the hands of your bank which will be earning considerably more than you are, on you money! Any excess money that the banks hold can be parked with the Bank of England and they will be earning base rate, so 4% AER!
It’s too early to see which providers are going to pass on this latest base rate hike but even with the intervention of the Treasury Select Committee, it’s unlikely to be your bank. So in order to improve the pounds in your pocket, make sure you switch in order to make your cash work as hard as possible.
@savingschampion
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