Banks ‘boost their profits’ as they deny savers billions of pounds in interest

Savers are losing £5.88 billion a year because banks are refusing to pass on higher interest rates to their customers.

In another blow to households already grappling with rising living costs, banks have failed to pass on a succession of interest rate rises and are boosting their own profits in the process.

Campaigners accused them of betraying their customers at a time when soaring inflation means the country is heading for the worst fall in living standards since the 1950s.

The Bank of England has raised the base rate three times since December to curtail the rampant rise in inflation, which currently stands at a 30-year high of 6.2 per cent. 

However, only a handful of high street banks have passed on the change in full to savers, despite increasing their mortgage rates in response to the change.

The base rate now stands at 0.75 per cent, up from 0.1 per cent last year. If banks had passed on that 0.65 percentage point increase, then savers would be earning an extra £5.88 billion a year in interest, a Telegraph analysis found.

High street banks were paying an average interest rate of 0.25 per cent in March. If they had passed on the 0.65 percentage point increase since December, then a customer with savings of £10,430 would earn an extra £62.58 a year.

Banks ‘keep all the benefits of a rate rise’

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, which conducted the research, said: “The high street banks don’t need our money, and they’re not afraid to offer us derisory rates in order to put us off. 

“They’ve used rate rises as a way to boost their profits, and left savers in their easy access accounts languishing on 0.01 per cent. 

“We’ll miss out on billions of pounds of interest because the banks are choosing to keep all the benefits of a rate rise to themselves.”

She pointed out that savers could earn hundreds of pounds by moving their money into the most competitive account, which pays 1.5 per cent. By moving savings of £10,430 into the Chase bank account, savers currently earning an average of 0.25 per cent could gain an extra £130.37.

“Instead of settling for the averages, we need to shop around for the best possible rate,” she said.

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