Savers struggle as banks reap profits from high interest rates

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None of the major British banks passed last month’s interest rate hike to savers – but they did start raising mortgage rates.

In another blow to families already struggling with the rising cost of living, banks are taking advantage of higher interest rates to boost their margins at the expense of customers.

Politicians and activists accused them of inaction, months after the central bank raised the key interest rate. Policy makers raised interest rates last month in an effort to cool rising inflation, which is being driven by higher energy prices. After cutting interest rates to a record low of 0.1 per cent during the pandemic, the Bank of England raised its policy rate to 0.25 per cent in December.

However, millions of savers have yet to benefit from the change. An analysis of more than 100 banks and building societies found that only four have raised the interest rate on some easily accessible variable savings accounts.

Only the Suffolk Building Association passed the full 0.15 percent increase for savers across all variable accounts, according to a Moneyfacts analysis. None of the major banks did, but Santander, Lloyds and Halifax all announced increases in their standard variable mortgage rates of 0.15 per cent in full shortly after the Bank of England’s December 16 decision.

Banks began raising interest rates on several fixed-rate deals in November, in anticipation of the Bank of England’s decision. HSBC, Barclays and NatWest have all raised prices. Nationwide kicked off the new year by increasing interest rates on some of its loans by as much as 0.45 percentage points, three times the Bank of England’s 0.15 percentage point increase.

It is the latest strain on family budgets, which are already under pressure from tax increases, rising energy costs and high grocery bills that will make the average £1,200 family worse off next year.

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