Jeremy Hunt to pressure banks to pass rising interest rates on to savings accounts

Jeremy Hunt will demand the major banks pass on higher interest rates to savers during a summit on Friday, amid growing calls for the financial sector to do more to help customers.

As i revealed last week, the seven biggest high-street banks earned nearly £5bn more in additional earnings last year by raising rates for borrowers, while keeping them low on savings accounts.

The practice has led to the banks being accused of “profiteering” at a time when the public is struggling due to the cost of living crisis.

The Chancellor has summoned the major banks to the Treasury to apply “soft political pressure” on them to go further in helping homeowners struggling with higher mortgage costs ahead of another expected Bank of England base rate rise on Thursday.

It comes against a backdrop of growing discontent over the amount of money banks have been making as a result of the base rate increasing from 0.1 per cent in December 2021 to an expected 4.75 on Thursday.

It has led to the cost of an average two-year fixed-rate mortgage being pushed to more than 6 per cent, while interest on easy-access savings accounts have remained far lower.

Rishi Sunak said the issue of banks passing on rate rises would be among the topics raised by the Chancellor on Friday.

Mr Sunak was forced to field questions on the matter during Prime Minister’s Questions in the Commons on Wednesday.

Tory MP Lia Nici said: “The Bank of England is raising interest rates to try to stem spending and therefore preventing inflation being baked into the economy.

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“The same can’t be said for those with savings accounts. Would it not be good for people to be encouraged and incentivised to save more, and would [the Prime Minister and the Chancellor] talk to the industry and encourage them or impel them to actually give a good deal to savers too?”

Mr Sunak replied: “It is vitally important that savers are treated fairly and that markets are functioning as competitively as we would expect them to be.

“I’m pleased to tell her that the Chancellor is meeting with the industry and the banks this Friday to discuss the matter that she has raised, and we will make sure that she and everyone else gets an update after that.”

A senior Labour spokesman said encouraging banks to incentivise savers to save their money would be a “sensible method to try and bring down inflation”.

Annual reports of the seven major high street banks showed they collectively made £4.8bn in additional earnings during 2022 due to interest rate rises – an increase from £28bn in 2021 to £32.8bn in 2022.

Martin Lewis, of MoneySavingExpert, said there was now a “moral argument” for banks to pass on higher rates to savers, rather than making money for their shareholders.