The City regulator said it had held a “constructive” meeting after summoning banks to discuss concerns surrounding interest rates for savers lagging behind the cost of mortgages.
The Financial Conduct Authority (FCA) said those in the meeting held on Thursday recognised that they needed to do more to help customers access the best rates.
The FCA said in a statement: “We held a constructive meeting today, which builds on work we have been doing over several months – to monitor the savings markets and the decisions made. We have challenged firms where their decision making has been slow.”
We have previously committed to reporting at the end of the month on how the savings market is supporting savers to benefit from higher interest rates. We will set out then whether further steps are needed— Financial Conduct Authority
It said: “Those in the room recognised that they needed to do more to help their consumers access the best rates. We too recognise there is a need for further guidance, and will continue our focus on this.
“We have previously committed to reporting at the end of the month on how the savings market is supporting savers to benefit from higher interest rates. We will set out then whether further steps are needed.”
A new consumer duty will come into force at the end of July, forcing financial firms to put customers at the heart of what they do.
The FCA said that through preparation for the consumer duty, “we have started to see some positive action by banks and building societies to improve their rates, and to ensure their customers are benefiting from better value products”.
“We now want to see that progress accelerate,” it said.
“We are also increasingly seeing customers switching their savings products to those with higher rates. We continue to urge savers to shop around to make sure they’re getting the best deal.”
The regulator said there were discussions about how the new consumer duty would set a new standard for firms from the end of July, including on savings rates.
It added: “We set out that expectation to bank and building society leaders in today’s meeting.”
David Postings, chief executive of UK Finance, which represents the banking and finance industry, said: “UK Finance and a number of our members had a constructive meeting with the FCA where we discussed a range of issues in relation to savings.
We look forward to continuing to work with the regulator on this important topic— David Postings, UK Finance
“The savings market is competitive, with a wide range of different accounts available to help people with their individual saving needs. We always encourage customers to shop around for the type of account that best suits them.
“We look forward to continuing to work with the regulator on this important topic.”
Bosses from HSBC UK, NatWest, Lloyds and Barclays were among those invited to the meeting.
According to data from Moneyfactscompare.co.uk, the average easy access savings rate on offer is 2.49%.
Average two and five-year fixed-rate mortgage rates recently broke through the 6% mark for the first time this year, having previously been above 6% during the market volatility that followed last autumn’s mini-budget.
The average two-year fixed homeowner mortgage rate is 6.52% and the average five-year fixed mortgage rate is 6.02%, according to Moneyfacts’ figures.
The Bank of England base rate is currently 5%, having increased 13 times in a row as the Bank tries to subdue stubbornly high inflation.
The Treasury Committee has been among those pressing banks to address concerns about the savings rates being paid.
Providers have been adjusting some savings rates upwards in recent days, and on Thursday morning there was a flurry of new savings announcements.
Skipton Building Society launched a new bonus saver on Thursday, offering savers a rate of 4.22% in its first year, which then reverts to 3.60%.
HSBC UK announced on Thursday that some savings rate changes would take place from Friday, including new rates of 5.05% on its one-year fixed-rate saver and 5.10% on its two-year fixed-rate saver. This follows some savings rate increases on HSBC accounts unveiled last week.
Yorkshire Building Society launched a new range of fixed-rate Isas on Thursday, including a one-year fixed-rate Isa at 5.10% and a two-year fixed-rate Isa at 5.20%.
Meanwhile, Shawbrook launched a new easy access savings account on Thursday, paying a rate of 4.35%.
On Wednesday, Coventry Building Society unveiled a one-year fixed-rate Isa at 5.30% and a two-year fixed-rate Isa at 5.40%.
Nationwide Building Society also announced some new savings deals on Wednesday, including a one-year fixed-rate Isa and one-year fixed-rate bonds paying 5.10%.
Laith Khalaf, head of investment analysis at AJ Bell, said: “An astonishing amount of money, amounting to the tune of £250 billion, is sitting in cash accounts paying no interest, according to Bank of England data …
“Savers shouldn’t wait for the banks to start paying decent rates on their accounts though. By voting with their feet, savers can obtain significantly better rates and put some much-needed competitive pressure on banks to boot.
“By shopping around for the best rate, and considering locking into fixed-term accounts, many savers will be able to significantly improve their lot.”
In the midst of the worst cost-of-living crisis in decades, it's crucial that savers get a decent return on the money they're able to put away - yet some of the country's biggest banks continue to offer rates far below market-leading alternatives— Jenny Ross, Which? Money
Jenny Ross, editor of Which? Money, said: “While high street banks are happy to pass on higher interest rates to mortgage holders, they continue to drag their heels when it comes to offering savers more competitive rates, so it’s right that the regulator is holding them to account.
“In the midst of the worst cost-of-living crisis in decades, it’s crucial that savers get a decent return on the money they’re able to put away – yet some of the country’s biggest banks continue to offer rates far below market-leading alternatives.
“The FCA’s consumer duty, which comes into force later this month, must be used to hold high street banks’ feet to the fire and ensure more firms do the right thing.”
Asked previously whether the banks’ behaviour amounted to profiteering, Prime Minister Rishi Sunak’s official spokesman said: “It’s something the regulator is looking into.”
Government minister Chris Philp said it was “wrong” that some banks “haven’t increased the rates they pay savers commensurately”.
“I think the FCA are quite right to call them in and raise that forcefully,” he told Sky News.
“We do need banks to behave in a way that’s fair, reasonable and is properly competitive as well.”
