It’s safe to say it’s been a rocky few months for banks when it comes to headlines – from unexplained current account closures to lacklustre savings deals; pumped up mortgage rates to boosted net interest profit margins.
Behind all this has been a slew of positive half year results. Britain’s biggest banks aren’t doing too badly at all. The thumping headlines are seemingly not bad for business.
This week, we’ve seen the Financial Conduct Authority growl and show a few teeth when it comes to savings rates.
It has come up with a 14-point plan to stop banks creaming so much profit.
Bad rates: The banks are clearly not paying market leading savings rates – if that annoys you, move your cash
Two of these points include reviewing the timing of savings changes when there is a base rate change and publishing analysis every six months of firms’ easy access savings rates, listed from best to worst.
This is all well and good, but at the same time, bank customers are not being forced to stay loyal.
We’re in a financial age of more choice – and one of the biggest examples of this is when it comes to our savings.
The truth of the matter, I suspect, is that people like to have fairly swollen current account balances (if they’re fortunate enough to be in that position) as it just feels good, and like to hold pots of cash with the same bank for ease and safety.
If you’re happy with that, and happy to forfeit better interest, then that’s your prerogative. I don’t see how or why a bank would force you to move and be proactive.
There are plenty of challengers out there offering a far better deal for easy-access rates, cash Isas, fixed rates and everything else – but in order to attract money, they need to have table topping, best buy rates.
They don’t have the same kind of established name in the banking world.
For that reason, it’s quite easy to see how banks are making increasingly boosted billions from the net interest margin – the gap between savings rates, and mortgage rates.
This is Money analysis this week shows that the five biggest banks are on track to make nearly £40billion again this year from that margin.
If that makes you mad, move your cash.
Today, it is expected that the Bank of England will hike interest rates another 0.25 percentage points to 5.25 per cent.
This would be its highest level since February 2008 – an era synonymous with banking collapses and savers being burnt with smaller providers.
According to Moneycomms analysis, best buy easy-access savings rates are well below where they were last time base rate was 5.25 per cent.
The top three deals were 6.5 per cent, 6.4 per cent and 6.31 per cent. But, the providers? Abbey National, Bradford & Bingley and Alliance & Leicester.
Today, the best rate comes from Shawbrook Bank at 4.63 per cent, some 1.87 percentage points below that.
And, when comparing to some big banks, that rate is 5.5 percentage points higher than the paltry 1 per cent some still offer with legacy accounts.
Andrew Hagger, from Moneycomms, says: ‘Easy-access savings rates have improved markedly as a result of 13 consecutive base rate hikes; however they are not at the levels seen 15 years ago.
‘It was a different environment, with retail funds highly sought after in the run up to the financial crisis.’
If you haven’t undertaken an audit of your accounts for some time, don’t be shocked to find yourself in one of these awful accounts – but again, you have to be proactive.
And while, when it comes to borrowing, mortgages have hogged many of the column inches in the last year, other borrowing types have also seen big rises in servicing the debt.
Take purchase credit cards for example. According to Moneycomms, some banks have increased their rates by 85 per cent compared to February 2008.
NatWest’s card had a 12.9 per cent rate then – that’s now an APR of 23.9 per cent. Others highlighted in the research include Barclaycard, up 67 per cent from 14.9 per cent to 24.9 per cent.
Hagger adds: ‘Those with an average balance of £2,000 are now paying an extra £140 to £220 per year in interest charges.
‘This isn’t an issue for those who pay their balance off in full each month, however with increasing numbers of people struggling to cope with the cost-of-living squeeze, these higher rates will be rubbing salt in the wound.’
Don’t like what you’ve just read? Move with your feet.
Happy with your bank and don’t care they’re making huge profits. Stay put.
It’s as simple as that.
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