Banks respond to MPs' questions on saving account rates

Nationwide, TSB, Santander and Virgin Money have all responded to MPs’ questions over how they set the interest rate paid to their savers. 

Last month, MPs on the Treasury committee wrote to the four organisations questioning why easy access savings rates are much lower than the current Bank of England base rate. 

According to the Financial Conduct Authority, collectively, these banks and building society account for a quarter of all personal current accounts. 

They were contacted by MPs after it was shown earlier this year that the ‘big four’ banks - Barclays, HSBC, Lloyds and NatWest - offered between 0.5 and 0.6 per cent easy access savings rates. 

In May, this had increased to between 0.7 and 1.3 per cent. At the time, the Bank of England’s base rate stood at 4.25 per cent. 

Since then, the base rate has been increased to 4.5 per cent as the Bank of England continues to battle inflation. 

MPs raised concerns that the big banks were squeezing record profits from their loyal savers in a high interest rate environment. 

Treasury committee chairperson Harriett Baldwin said at the time: “Banks must do more to encourage saving.

“As a committee, we would like to know why savings rates offered by banks and building societies are so much lower than the current base rate, and whether banks tell their loyal customers better deals could be available. 

“We are concerned that the loyalty penalty may be particularly severe for elderly or vulnerable customers who may not be able to take advantage of higher rates available online,” Baldwin said. 

Responses

At the time of requesting the information from Nationwide, TSB, Santander and Virgin Money their easy access saver account rates stood at 1.25, 0.9, 0.7 and 0.25 per cent respectively. 

Responding to the MPs request, each of the four organisations pointed to the variety of different savings accounts they offered and noted the different rates available on each. 

Nationwide explained that it could offer more competitive rates on savings accounts with longer fixed terms. 

“Generally, the longer that deposits can be left, the higher the rate,” Debbie Crosbie, chief executive at Nationwide wrote.  

“With instant access funds, we can’t lend them so easily to mortgage borrowers, who generally seek fixed term lending. As a result, the market tends to offer higher rates for fixed term deposits because of the certainty and stability they provide,” she said. 

Likewise, Santander explained that in determining how increases in the base rate are passed on to its savers that the base rate is not the only factor it takes into account in its pricing decisions.