Savers need to ‘vote with feet’ for better rates

SAVERS are being urged to “vote with their feet” as millions are getting a low return from the big high street banks, despite more than a year of rocketing interest rates.

Yesterday MPs blasted Barclays, HSBC, Lloyds Banking Group and NatWest Group for failing to pass on higher interest rates to customers while simultaneously ramping up their mortgage rates.

The cross-party Treasury Committee accused the big four of boosting profits by increasing the gap between the interest paid out to savers and the interest they charge borrowers.

MPs said customers earn between 0.50 per cent and 0.65 per cent on basic savings accounts, and told bank bosses to explain why rates are so low.

The Bank of England has hiked the base rate from 0.1 per cent to four per cent since December 2021, but these banks have been slow to follow suit.

BoE figures show that variable-rate mortgages doubled from two per cent to four per cent last year, while rates on fixed-rate Isas rose from 0.5 per cent to just one per cent.

Rising interest rates benefit banks because it allows them to widen their net interest margins, the difference between what they pay savers and charge borrowers.

Banks are boosting profits and savers and borrowers are paying the price, said AJ Bell head of personal finance Laura Suter: “The bigger the difference between savings and mortgage rates, the bigger the profits.”

Big banks are also protecting themselves in case of a recession this year: “They are preparing for a wave of defaults and trying to shore up their balance sheets in anticipation.”

Savers can also be their own worst enemies. “They can be lazy when it comes to moving their savings to get a better rate,” Suter said.

Lots of people stashed away cash during the pandemic and have left the money on deposit without checking what return they get. Around £268 billion is sitting in accounts paying zero interest, according to analysis by Coventry Building Society.

This comes at a time when smaller, challenger banks are paying interest rates of more than four per cent.

Anna Bowes, founder of rate-tracking service Savings Champion, called this a “longrunning scandal” and said savers must “vote with their feet”.

“Loyalty does not pay. If your bank is giving you a rotten deal, it’s time to move on. Otherwise you are throwing money away,” she added.

Bowes said challenger banks Tandem, OakNorth, Shawbrook and Atom pay more than three per cent a year with easy access.

Savers who are willing to lock their money away can get 4.17 per cent from SmartSave’s one-year fixed rate bond. Close Brothers pays 4.45 per cent a year, fixed for five years.

Bowes said savings rates are unlikely to rise much further, as banks anticipate interest rates may soon peak and could start falling by the end of 2023: “If you see a good deal, grab it.”