Banks Slammed On
Low Savings Rates
Bank bosses have
been probed by the UK's
financial watchdog over complaints that interest rates on savings are too low and are not being passed
on to savers.
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Higher interest
rates have led banks to put up mortgage costs sharply, but savings rates are
barely rising.
Chancellor Jeremy
Hunt has finally noticed that savers have been ripped off and says it is an "issue which needs
solving", the BBC reports.
Millions of
households are struggling with the soaring cost of living, higher
mortgage rates and energy bills, which have also failed to come down following
the fall in wholesale oil and gas prices.
The heads of the
worst culprits; Lloyds, HSBC, NatWest
and Barclays banks have been summoned to a meeting by the
Financial Conduct Authority (FCA) on Thursday.
The so-called watchdog will question the banks on their poor savings rates and on how they communicate
with customers, according to the Financial Times.
HSBC said it had
increased its savings rates "more than a dozen times since the beginning
of last year, with every savings product seeing rates increased on multiple
occasions during that time".
NatWest have not passed on rates on many of its older
accounts at all, leaving it to customers to switch to different accounts to
achieve a decent rate on their savings.
The Bank of England
has been increasing UK interest rates since December 2021 as it tries to bring
down soaring price rises.
Its base rate -
which has a direct effect on mortgage and savings rates has risen from
almost zero to 5% in the last 18 months.
The Central Bank wants to make it more expensive for people to borrow and spend and
encourage them to save – in the hope that we will all spend less so that inflation cools.
Average mortgage
rates have soared above 6%, while returns on savings and current accounts have risen by a much smaller
amount, in some case not at all.
The average rate
for a two-year mortgage deal hit 6.47%, while the average easy access savings
rate was 2.45%, a gap of 4.02 percentage points.
The average one-year
fixed savings rate was 4.8%.
Low returns on savings combined high inflations is eating
away at people’s savings.
This follows over a decade of derisory returns. The banks have been offering poor savings rates since the 2008 financial crisis. Since then, it
has been more profitable to borrow money and buy assets such as property, hence
the housing bubble and unaffordable homes for first-time buyers.
The big four High
Street banks have a monopoly
on banking, lending and savings, although challenger banks are making headway.
Many older people are not used to internet banking at a time
when the four main banks are closing hundreds of high street branches leaving
customers isolated.
Even if the banks
increase savings rates increase, money held in a bank account will not give you
a ‘real’ rate of return above inflation.
If you want your
money to grow so you can build wealth and become financially free you need to
invest it into real assets, such as property or the stock market.
This can be done
using low-cost tracker funds, unit trusts, mutual funds and pension funds. Average
returns in a tracker fund invested in the US S&P 500 index are around 10%
per annum, and you can start saving as little as £50 per month into most funds.
See also:
Housing Market in DEEP Trouble: https://youtu.be/USGREwntT1I
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