High street banks have been raising the rates on easy access savings accounts after the City watchdog threatened to take action against firms that are not offering customers ‘fair value’.
In the space of a month, HSBC has lifted the interest rate on its instant access account to 2.0 per cent, up from 1.7 per cent, while Natwest now offers 1.75 per cent, up from 1.4 per cent at the beginning of August. Lloyds meanwhile offers 1.4 per cent, up from 1.1 per cent.
Barclays in contrast has kept its rates steady, offering savers 1.5 per cent on its easy access accounts.
Banks have come under immense pressure from politicians and regulators for failing to pass on base rate increases to the £1.5 trillion savings market, particularly in easy access accounts, which make up 60 per cent of balances across the nine largest banks.
According to the Financial Conduct Authority (FCA), the largest nine banks had only passed through 28 per cent of the base rate rise to easy access deposits between January 2022 and May 2023.
The FCA warned firms at the beginning of August that they would face “robust action” if they could not justify to the regulator how their rates offered customers ‘fair value’.
Having received the responses from the banks, the FCA said it will “analyse the information” before publishing an update later this autumn.
“We welcome the development of a more competitive market and encourage people to shop around for the best deal,” the watchdog said.
In an attempt to further pressure banks into action, the government’s savings bank, NS&I, launched a one-year fixed-rate savings accounts paying out 6.2 per cent. This is the highest rate offered on these products since they were first made available in 2008, and makes it a market leader in the savings space.
Throughout the savings rate furore, banks have pointed out that they offer better rates on time accounts. These products generally require consumers to lock up their funds for a certain period of time.
According to Bank of England data out earlier this week, some £10.2bn was withdrawn from interest-bearing sight accounts in July, with £10.1bn moving into interest-bearing time accounts, up from the £6.5bn moved into those accounts in June.
A UK Finance spokesperson said: “The savings market is competitive and we have seen rates increase on both instant access and fixed rate accounts. UK banks have passed through a greater proportion of interest rate rises to savers than in other countries.”