The Daily Telegraph

Savers face a long wait for interest rates to rise

- By Szu Ping Chan

SAVERS face years of lagging returns because cash-rich banks are unlikely to pass on fully any Bank of England rate rises, new analysis shows.

A substantia­l rise in bank deposits during the pandemic means many highstreet banks do not need to compete for savers’ cash, says Deutsche Bank. Deposits have grown by 25pc since 2019, far outstrippi­ng loan growth at 7pc. Household deposits stand at £1.8 trillion, according to Bank of England data.

“There are so many deposits at the moment, and everyone is so flush with liquidity that nobody needs to pass on the savings rates,” said Robert Noble, an analyst at Deutsche Bank.

Deutsche Bank analysis shows highstreet banks can afford to lose an average of 14pc of their deposits – or tens of billions of pounds – to other providers before they will need to find other sources of funding.

The Bank of England increased interest rates from a record low of 0.1pc at the end of 2021 to 1.75pc today.

However, with high-street banks sitting on huge cash piles, Mr Noble said many have no incentive to pass on rate rises to secure funding.

Deutsche Bank found that current account balances had swelled 40pc between 2019 and 2021, with many high-street banks paying zero interest.

The average interest rate on an easy access rate now stands at 0.84pc, according to Moneyfacts. Savers willing to tie their money up for a year can earn more than 2pc for the first time since 2012.

The Bank of England is expected to raise interest rates above 2pc at its meeting on Thursday. This would be the highest rate since 2008.

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