UK finance minister Hunt says banks are slow to pass on rate hikes to savers

British Chancellor of the Exchequer Jeremy Hunt  at the London Tech Week in London, Britain, June 12, 2023. REUTERS/Toby Melville/File photo

LONDON  – Britain’s finance minister Jeremy Hunt said on Monday that banks are too slow to pass on increases in central bank interest rates to savers and this is a problem that needs to be resolved.

Banks have moved quickly to pass on higher interest rates to their mortgage customers, but moved much more slowly to pass higher returns to savers.

Hunt said he met with bank bosses on Friday he raised the failure to pass on the rates “in no uncertain terms”

“It is taking too long for the increase in interest rates to be passed on to savers, particularly with instant access accounts,” Hunt told parliament.

“I am working on a solution because I think it is an issue that needs resolving.”

Banks‘ profits are generally improved by an increase in interest rates. It tends to boost net interest income: the amount of money banks can increase borrowing costs versus the amount they pay out in interest on deposits.

Parliament’s Treasury Select Committee said earlier this month that while British lenders had lifted rates on easy access savings accounts in recent months, they were lagging the Bank of England’s base rate.

The committee on June 8 said that the easy access savings rates offered Britain’s four largest banks — Lloyds, NatWest, HSBC, and Barclays — were offering rates 0.7-1.35 percent for easy access savings accounts, at a time when the central bank had raised the base rate to 4.5 percent.

Around 60 percent of household deposits are held in instant access accounts, the committee said.