Banks passing on BOE interest rate increases

RG2015

I still cannot understand people complaining about any individual bank not raising their savings rates.

We have an open market economy. If a bank has poor rates, savers can move their money.

The very concept of passing on the BoE rate rise to savers is a complete nonsense. If people are aggrieved they can move their money. If they don’t, they cannot then moan that their rates are rubbish.

If the only complaint is that banks are making lots of money then all I can say is that this has always been the case. This quite separate from not raising savings rates.

TheBanker

RG2015 said:

I still cannot understand people complaining about any individual bank not raising their savings rates.

We have an open market economy. If a bank has poor rates, savers can move their money.

The very concept of passing on the BoE rate rise to savers is a complete nonsense. If people are aggrieved they can move their money. If they don’t, they cannot then moan that their rates are rubbish.

If the only complaint is that banks are making lots of money then all I can say is that this has always been the case. This quite separate from not raising savings rates.

Indeed, and if you object to the banks making money, save with a mutual building society (excluding Nationwide), or a credit union. You might get a slightly better interest rate but more importantly nobody is making a profit. 

RG2015

Is it really “absolutely outrageous” ? 

MiserlyMartin

Yes it is. And also outrageous is that savings rates are 1% below the bank of england rate. Back in the 90s and 00s they were 1% above base rate. Banks are making a big margin out of savers

TheBanker

MiserlyMartin said:

Yes it is. And also outrageous is that savings rates are 1% below the bank of england rate. Back in the 90s and 00s they were 1% above base rate. Banks are making a big margin out of savers

But with a few exceptions, so are the rates offered by mutual building societies, who don't have shareholders or make profits (Nationwide excepted!).

Banks will be making a profit, but all lenders will be facing higher default rates on their lending/mortgage book so may well be building up reserves. Remember that on the lending side, they've just signed up to various measures to help struggling borrowers. So I'd be surprised if the banks who've not passed on last week's 0.5% increase to savers are actually going to make 0.5% extra profit. 

Altior

What is seemingly outrageous is the apparent financial ineptitude of much of the UK adult population. Many of them seemingly anticipating sub 1% interest rates for the 30 year life of their domestic mortgage liabilities. Many of them also seemingly incapable of withdrawing cash funds held with one provider, and opening up another savings account with a different provider. If only it was possible to do this online in 5 minutes, or there were now various savings platforms to do this 'work' for you.

It is of course this kind of ineptitude which screwed up the competitive domestic energy markets.

It's super awesome as society hurtles inexorably towards the driver of policy being the requirement to mandate for the lowest common denominator. I'm sure many would be happy if the competitive savings market was killed, as long as the financially incapable received a slightly improved interest rate automatically, and the capable suffered from the resultant lack of competition. 

RG2015

In other words Caveat Emptor.

simon_or

I have a slightly different take, specifically in relation to the mega banks.

I see big banks more as utilities than a free-market consumer business (say Tesco or Sainsbury's) because they are too big to fail and hence are implicitly backstopped by the government/taxpayer as has been evidenced time and again in recent decades.

On that basis, I can see why one would expect them to show a different behaviour to a purely profit-seeking consumer business.

RG2015

simon_or said:

I have a slightly different take, specifically in relation to the mega banks.

I see big banks more as utilities than a free-market consumer business (say Tesco or Sainsbury's) because they are too big to fail and hence are implicitly backstopped by the government/taxpayer as has been evidenced time and again in recent decades.

On that basis, I can see why one would expect them to show a different behaviour to a purely profit-seeking consumer business.

This is a very astute observation that I hadn’t considered.

Does that by definition include NS&I or is that the minimum  expected?

I could always backtrack and say I cannot understand people complaining that banks like Atom or Zopa haven’t passed on the BoE rate increase.

dealyboy

Jeremy Hunt in today's (Sunday 25th June) 'The Mail on Sunday' ...

... after itemizing the three key commitments agreed by banks to support mortgage holders ...

" ... I also made clear to banks that on the other side of the coin we expect savers to be getting a fair deal. People are rightly frustrated that when interest rates rise, savings rates do not rise as fast.

That's why the regulator, The Financial Conduct Authority, has written to banks to express that savings rates should be rising. It is an issue I am closely monitoring, too. ... "

I think 1 or 2% on savings rates would be appropriate, we shall have to wait and see Jeremy  .