In a recent development, the UK Chancellor, Jeremy Hunt, has issued a stern warning to banks, urging them to expedite the process of passing on increased interest rates to savers. This comes in the wake of mounting pressure from both Labour and Conservative backbenchers during a discussion about support for mortgage holders.
The crux of the debate revolves around the pace at which banks are applying the rising interest rates to savings accounts. Lawmakers are keen to ensure that people’s savings grow at the same rate as their mortgage repayments, both of which are influenced by the Bank of England’s base rate.
Labour’s Dame Angela Eagle, a former Treasury minister under Gordon Brown, has called on banks to halt their “profiteering”. She pointed out that banks have made over £4bn extra this quarter by paying out below the current interest level while charging borrowers close to the Bank of England base rate. The Bank of England recently increased the base rate from 4.5% to 5%.
According to data from Moneyfactscompare.co.uk, a typical easy-access savings rate was 2.35%, and the average easy-access ISA rate was 2.47%. The Chancellor met with top executives from financial institutions such as Lloyds, NatWest, Barclays, and Virgin Money last week to discuss this issue.
Mr. Hunt acknowledged that the process of passing on increased interest rates to savers, particularly those with instant access accounts, is taking too long. He assured that he has addressed this issue with the banks and is working towards a solution.
Conservative MP Mark Pritchard also expressed concerns about the issue. Another Conservative MP, Robin Walker, urged Mr. Hunt to encourage banks to pass on interest rates to savers, highlighting that increasing the payment for people who save is a crucial element in tackling inflation.
Chancellor Jeremy Hunt agreed, stating that encouraging more people to save is technically counter-inflationary and should be promoted. He explained that when people spend money rather than save, it can cause inflation, as increased demand leads to higher prices.
