Government is asking banks to up savings interest rates and be fair?

AstonSmith

Zanderman said:

There are plenty of 4%+ savings accounts available that don't need a specific current account. For example:
(... accounts ...)

And that's just easy access ones. You need to look a bit harder!

Thank you, I will have a look at some of those, although I do recognise a few names already (e.g. Chip).

I remain sore because the last time I tried to open one (Marcus a few years ago when the rates were comparatively great) I was told I "didn't meet their criteria for opening an account".

So there's no guarantee with any savings banks that:

1. they'll even open the account for me
2. I'll get the advertised rate
3. they'll let me have my money when I want it back

All because of some criteria.

I'm not sure why anyone thinks banks have some sort of duty to track interest rates and pass them on...

Isn't it because rate rises are passed on so fast? Were there any tracker mortgages that didn't rise when the base rate rose?

Zanderman

AstonSmith said:

Zanderman said:

I'm not sure why anyone thinks banks have some sort of duty to track interest rates and pass them on...

Isn't it because rate rises are passed on so fast? Were there any tracker mortgages that didn't rise when the base rate rose?

They will, obviously, track the base rate fairly quickly for loans and mortgages as that makes money for them, and they risk losing money if they don't.

But they have little incentive (and certainly no duty) to do that (other than to attract new customers) for savings accounts - either quickly or indeed ever - for existing savings products and/or for existing customers, as doing that makes them less money. 

boingy

I distinctly remember back when interest rates were dropping that savings rates dropped more quickly than mortgages and the gap between the two widened the lower the rates got. At the time the banks claimed that this had to happen because of all their fixed overheads, which was a feasible excuse. I wonder what their excuse is now that the situation is reversed. I bet they can give all sorts of reasons but none of them will be "because we just want to make as much money as possible", which, of course, is their right.

RogerPensionGuy

I think the banks have two different vehicle/cars on these interest rate matters.

Car 1 can accelerate from Zero to a 100 MPH in a couple of seconds but unfortunately has no brakes so when the gas peddle gets released the car just goes on and on and is very slow at reducing speed. Customers borrowing money are put in Car 1.

Car 2 is only powered by a mouse under the bonnet and can only get to 20 MPH in 5 minutes happily for the banks it's fitted with big brakes on each wheel and can drop an anchor out the back to slow it to zero in a few seconds. Customers with deposits are all put in Car 2.

Nothing new above I'm afraid.

Money_Grabber13579

There is also the fact that many banks will still have mortgage customers with fixed rate mortgages at low rates and whilst those continue to exist, they simply won’t be able to afford to pass on the full increase in base rate. It would be financial suicide to be offering 5% to everyone but still be lending out at 1 or 2%. If banks are forced to increase rates at the bottom of the savings band, rates at the top of the savings band will fall.

Zanderman

RogerPensionGuy said:

I think the banks have two different vehicle/cars on these interest rate matters.

Car 1 can accelerate from Zero to a 100 MPH in a couple of seconds but unfortunately has no brakes so when the gas peddle gets released the car just goes on and on and is very slow at reducing speed. Customers borrowing money are put in Car 1.

Car 2 is only powered by a mouse under the bonnet and can only get to 20 MPH in 5 minutes happily for the banks it's fitted with big brakes on each wheel and can drop an anchor out the back to slow it to zero in a few seconds. Customers with deposits are all put in Car 2.

Nothing new above I'm afraid.

But most banks, in your car analogy, have a variety of cars, with very different acceleration for both loans and for savings.

Some savings cars are indeed very slow.  Others have quite good acceleration, and some very fast. 

You need to change your car now and then (sometimes with the same bank) if you want to go faster.

It's not the bank's job to change your car for you. 

MBR1

I usually swap between, sainsburys, santander, cynergy, every year to benifit from the higher intrest rates, currently sainsburys are offering 4.21% on savings. Hopefully it will rise for when i switch next yr.

lohr500

If the banks are forced to pass on BOE rate increases and we end up with a regulated interest rate market, then I am sure that we can say goodbye to free current account services, cashpoint withdrawals and some of the other perks that the banks wrap around current accounts.  

I can't see it ever happening. It needs to remain a free market with consumers voting with their feet. (Or keyboard fingers!).

Rob5342

It's the same with anything really, better deals are there if you look for them, but if you can't be bothered then that's on you.

Exodi

I think people are only focusing on one part of the issue in this thread - the point about banks allowing people to wallow in historic 0.1% AER accounts (and the moral arguments of whose responsibility it is).

The biggest issue, that I think the government was focused on, was why the banks seem quicker to increase mortgage rates, than savings rates.

As can be seen in the below - the difference between mortgages and savings at the end of 2021 was about 2%, it's now double that. In a Utopian world these two lines should be the same shape, running parallel to each other, with the constant gap being the banks margin. It doesn't seem an unreasonable accusation that the banks are quicker to hike mortgage rates than savings - look at present.

Obviously there are better easy access products available than the 2.49% average below, as there are for mortgages.