The UK's financial watchdog has summoned bank executives to address concerns over low interest rates on savings. While higher interest rates have caused mortgage costs to rise sharply, savings rates have not increased at the same pace. Chancellor Jeremy Hunt acknowledges this as an issue that requires a solution, particularly as many households are struggling with the rising cost of living. The heads of Lloyds, HSBC, NatWest, and Barclays banks will meet with the Financial Conduct Authority (FCA) to discuss these matters.
According to reports, the FCA will discuss savings rates and the banks' communication with customers during the meeting. HSBC stated that it has raised its savings rates multiple times for every savings product since the beginning of last year. The Bank of England has been gradually increasing interest rates in an attempt to address soaring inflation. The base rate, which directly affects mortgage and savings rates, currently stands at 5%, a significant increase from near zero 18 months ago.
The aim of the Bank of England's strategy is to make borrowing more expensive and saving more appealing, with the intention of reducing consumer spending and cooling price rises. However, while average mortgage rates have risen above 6%, returns on savings and current accounts have increased by a much smaller margin. The average rate for a two-year mortgage deal reached 6.47%, while the average easy access savings rate stood at 2.45%, creating a gap of 4.02 percentage points. The average one-year fixed savings rate was 4.8%.