Hunt claims that banks are slow to pass on savings rates

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The chancellor has complained that banks are "taking too long" to pass on interest rate increases to savers.

People with instant access accounts were particularly affected by the "issue that needs solving," according to Jeremy Hunt.

Banks appear to be moving more slowly to increase returns for savers than they have in raising interest rates for mortgage customers.

Savings and mortgage rates, according to the trade group for the banking industry, are not "directly linked.".

But Mr. Hunt claimed that last week, he addressed the matter with banks in "no uncertain terms.".

"It is taking too long for the increases in interest rates to be passed on to savers," he said, adding that people with instant access accounts were particularly affected. According to Mr. Hunt, those who have fixed-term, fixed-notice accounts are more frequently subject to rate increases.

Recent data indicates that the average mortgage and savings rates are now further apart than they were in December 2021, when the Bank of England first began raising interest rates in an effort to slow the rate of increase in consumer prices.

According to financial information company Moneyfacts, at the time, the average interest rate on a two-year fixed mortgage was 2.38 percent, while the average interest rate on the most popular type of savings account, easy access savings, was 0.19 percent.

The average two-year mortgage deal hit 6.23 percent on Monday, while the savings rate was 2.36 percent, resulting in a 3.87 percent difference.

In spite of the fact that the gap has grown since interest rates were first raised, it is still smaller than it was in December 2022, when it was 4 point 24 percent.

Interest rate increases typically boost net interest income, or the amount that banks can raise borrowing costs relative to the amount of interest they pay out on deposits, which typically increases bank profits.

Savings and mortgage rates "are not directly linked and therefore move at different times and by different amounts," according to UK Finance, the trade organization for the banking industry.

According to the statement, "Savings rates are driven by a number of factors, not just the Bank of England's Bank Rate. One key factor is whether someone wants instant access or can deposit money for a longer period of time.

However, Treasury Committee members have recently brought up the concern that savings rates haven't increased consistently in line with mortgage costs.

MPs questioned the CEOs of four of the largest UK banks in February regarding how generous their savings rates were: NatWest, Lloyds, HSBC, and Barclays.

The banks argued at the time that savers had access to a variety of competitive offers, but they have since come under fire after Lloyds' interest rates on savings were dubbed "measly" this month.

In order to discuss inflation and how interest rate changes are passed on to consumers, the chancellor will meet with regulators on Wednesday.

The Treasury responded that Mr. Hunt was in "regular contact" with banks when asked by the BBC why he hadn't brought up the subject of savings returns earlier.

Peter Ruddick contributed more reporting.

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