Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
UK Chancellor Jeremy Hunt has said he is ‘working on a solution’ to ensure banks act quicker to pass on interest rate rises to savers.
Hunt said he told bank bosses in ‘no uncertain terms’ that there is an issue after acknowledging it is currently ‘taking too long’ for them to pass on the changes to savers.
His remarks came as MPs pressed the government to take further action after lenders representing over 75% of the market agreed to a ‘mortgage charter’, providing support for residential mortgage customers.
Speaking in the Commons, Labour’s former Treasury minister Angela Eagle said: ‘Doesn’t he worry that the banks are being very slow to pass on interest rate rises to those who are saving whilst they are passing almost immediately interest rate rises on to those who borrow, which makes the interest rate mechanism much less effective in dealing with the inflation situation?
‘And did he notice, like I did, that the banks this quarter made over £4 billion extra on the differential between these?
‘So shouldn’t he be much tougher on the banks and what is he going to do to stop this profiteering?’
Hunt replied: ‘(Eagle) is absolutely right, it is taking too long for the increases in interest rates to be passed on to savers, particularly with instant access accounts the rates are more frequently being passed on to people who have fixed-term, fixed-notice accounts.
‘But she’s right, there is an issue there. I raised that issue in no uncertain terms with the banks when I met them and I’m working on a solution because I think it is an issue that needs resolving.’
Conservative MP Mark Pritchard welcomed the ‘mortgage charter’ but said: ‘Constituents are suffering, they are very concerned, many are having to choose between food, clothes, shoes and paying the mortgage or paying the rent, and decisions we make here either as a governing party or cross-party are having a direct impact on individuals’ lives every single day.
‘So can I join cross-party with (Eagle) and say she is absolutely right that so often when the base rate rises, lenders are very quick to raise interest rates on our constituents, and when they fall and they surely will fall and hopefully very soon, possibly in the autumn, we’ll see can (Hunt) make sure that those reductions are passed on as quickly as possible to our constituents?’
Hunt defended the government’s record on supporting people, adding: ‘One thing that can definitely happen better than it is now is passing on increases in the base rates to savers.’
The Bank of England last week hiked the base rate to 5.00% from 4.50%.
According to figures released by Moneyfactscompare.co.uk last Friday, the average easy access savings rate was 2.35% while the average easy access Isa rate was 2.47%. Both of these average rates were unchanged from Thursday, Moneyfacts said.
Conservative MP Anna Firth noted the majority of the mortgage market is fixed rather than floating, adding: ‘Rising short-term interest rates will not necessarily result in falling inflation and we do need to look at other measures, such as making sure that interest rates are passed on to savers so they keep their money in the bank.’
source: PA
Copyright 2023 Alliance News Ltd. All Rights Reserved.