How banks have SQUEEZED extra £3billion out of savers and borrowers
Big five firms make killing from soaring rates in just three months
BRITAIN’S five biggest banks have squeezed an extra £3 billion out of customers by increasing mortgage rates while holding savings deals at pitiful lows, Money Mail can reveal.
In just three months, the high street giants have pocketed an eye-watering £16 billion from their so- called ‘ net interest margins’ — the gap between what they charge borrowers and pay savers.
This compares to just under £13 billion for the same three-month period in 2021. The damning figures are buried in the just-published banks’ reports for the three months from July to September.
And their takings are likely to swell further, as the Bank of England is expected to increase the base rate by 0.75 percentage points tomorrow, taking it to 3 pc.
Lenders have been quick to hike mortgage deals to 14-year highs on the back of rising interest rates. Yet they have passed on next to nothing to loyal savers. The worst offenders continue to pay a paltry 0.2 pc on popular savings accounts while charging homebuyers as much as 6 pc to lock in a mortgage offer.
The average rate on easy-access savings accounts is still just 0.4 pc, up from 0.1 pc in January, according to Bank of England data.
Laura Suter, of broker AJ Bell, explains: ‘Banks are very keen to protect their profits, which comes at a cost to UK households.
‘ Banks make money on the difference between what they charge those borrowing money and what they hand over to savers — the bigger the difference, the bigger the profits.’
Britain’s big five banks — Barclays, HSBC, Lloyds, NatWest and Santander — have all increased the gap between what they charge borrowers and pay savers, known as their net interest margin, according to the latest quarterly results published last week.
By widening this gap, they boost profits. Challenger banks tend to offer much more competitive rates than the big household names because they need to encourage customers to switch to them. Major banks have little incentive to raise rates as they already hold trillions of pounds of savers’ cash.
Lloyds Banking Group, which includes Halifax and Bank of Scotland, reported a net interest margin of 2.98 pc in the three months to September, up from 2.52 pc in the same period last year. The income it took from this gap increased from £2.85 billion last year to £3.39 billion.
At NatWest the margin climbed to 2.99 pc — up from 2.35 pc in the same period last year — earning it £2.64 billion in profits. Barclays has the biggest margin of 3.01 pc, bringing in profits of £1.56 billion.
Santander UK reported a margin of 2.07 pc for the three months to September, up slightly from 1.91 pc in 2021, netting £1.15 billion in profit.
Meanwhile HSBC, which only reports its global figures, saw its margin grow to 1.57 pc in the period from 1.19 pc last year, raking in £7.48 billion.
In total, the bank results showed they netted an extra £3.32 billion from the gap between the interest they charged and received from customers between July and September compared with a year ago. There have been calls for the Government to impose a windfall tax on banking giants’ profits to help cover a £ 40 billion hole in the UK’s public finances. But experts think Prime Minister Rishi Sunak will fear such a move could upset the City. Last week NatWest chief executive Alison Rose complained that banks already pay more tax than any other sector.
The base rate has risen seven times in the past 12 months to combat rising inflation.
But the rates offered on savings accounts are still lower than the dark days of 2009. In March 2009 the base rate was 0.5 pc but the best easy-access savings accounts paid as much as 6 pc, according to data from analyst Moneyfacts. Last December, the rates all the big banks paid on easy-access accounts was 0.01 pc. At the time the base rate was 0.1 pc. Since then, it has surged to 2.25 pc. Yet Santander’s Everyday Saver is only 0.2 pc, while Barclays’ Everyday Saver account offers just 0.25 pc up to £100,000. Someone with £ 10,000 of savings in an account paying 0.2 pc would earn just £20 a year.
Barclays pays a paltry 0.3 pc on its instant-access cash Isa for any sum below £30,000, while Lloyds pays a flat rate of 0.4 pc for its Instant Cash Isa.
By contrast, smaller banks and building societies have pushed up their rates. Top online account rates include Al Rayan Bank at 2.81 pc while Aldermore, Hampshire Bank, RCI Bank and Secure Trust also offer 2 pc.
On the high street, Swansea Building Society pays local savers 2 pc and Skipton Building Society pays 1.9 pc.
Laura Suter at AJ Bell says: ‘Until savers vote with their feet and move their money to accounts with better rates, the big brand names don’t need to offer savers more attractive deals.’
Over the past two months, banks have pulled thousands of mortgage deals and re-advertised them at much higher rates.
RATES have soared from an average of 2 pc a year ago to nearer 6 pc, in some cases hiking repayments by as much as half. The last time mortgage rates were higher than 6 pc was at the start of the financial crash in 2008.
NatWest was offering first-time buyers rates as low as 1.6 pc last year. But now, someone buying a home at the UK average house price of £296,000 with a 10 pc deposit for a 25-year term would be offered a rate of 6.54 pc to fix for two years with NatWest.
This has added £ 676.42 to monthly repayments, which would now total £1,805.42.
And Lloyds would offer the same buyer 6.41 pc to fix for two years, costing £1,784 per month with a product fee of £999, while HSBC offers a slightly lower 6.04 pc.
A spokesman for Santander says: ‘ We continually review our products in light of market conditions and make changes as appropriate.’
A NatWest spokesman adds: ‘We continue to support our customers to build their financial capability through savings. We’ve seen a rise in customers saving this year.’
Lloyds, Barclays and HSBC declined to comment further.