A powerful group of MPs has demanded answers from four high street banks over their “measly” interest rates for savers.
The Treasury committee wants them to pass on interest rate hikes quicker and more generously.
Tthe Bank of England, led by Andrew Bailey, is set to increase the base rate from 4.25 percent to 4.5 percent – the 12th consecutive rise.
Harriett Baldwin MP, chair of the Treasury committee, said latest financial results announcements showed the UK’s biggest banks were “continuing to squeeze record profits from loyal savers”.
READ MORE: Bank of England is warned further interest rate rises will tip UK into recession
She added: “In a high-interest rate environment, and with further Bank of England base rate rises possible, banks must do more to encourage saving.
“As a committee, we would like to know why savings rates offered by banks and building societies are so much lower than the
base rate, and whether banks tell their loyal customers that better deals could be available.
“The loyalty penalty may be particularly severe for elderly or vulnerable customers who may not be able to take advantage of higher rates online”.
She said savers should “vote with their feet” and find better offers, adding: “This, more than anything, will drive the banks to increase their measly rates.”
Some of the biggest names on the high street are offering rates of just 0.7 percent on their instant access Isa and savings accounts, according to Which?
Now the committee has written to Nationwide Building Society, Santander, TSB and Virgin Money about their easy access savings accounts. Collectively, these banks and building societies, account for around a quarter of personal current accounts.
Earlier the committee shined a spotlight on the rates offered by the “big four” banks – Barclays, HSBC, Lloyds and NatWest.
Virgin Money’s everyday saver account offers a rate of just 0.25 percent, which is nearly 3.5 percentage points below the best available easy-access account on the market, from Chip, which offers 3.71 percent.
If someone was to put £17,000 into the Virgin Money account – roughly the average UK savings figure – they would earn just £42.50 in a year, as opposed to £630.70 at 3.71 percent.
Sarah Coles, personal finance specialist at Hargreaves Lans-down, said: “We can’t rely on the banks deciding to do the decent thing. We need to track down competitive deals.”
Ratesetters on the BoE’s Monetary Policy Committee are expected to raise the base rate today in their battle against the highest inflation in 40 years.
An interest rate rise would also mark the highest level since 2008.
It comes as UK Consumer Prices Index inflation remained firmly in double digits in March.
The Bank’s aim in elevating interest rates is to bring inflation down to its two percent target.
Economists are also awaiting the Bank’s Monetary Policy Report. In February the Bank said it expects interest rates to fall sharply this year. But with inflation still high, the latest report will be watched closely for signs this forecast has changed.
