- Jeremy Hunt urges banks to pass on interest rate increases to depositors
- Disparity between mortgage and savings rates questioned by MPs
- Encouraging banks to prioritize passing on interest rates to savers for fighting inflation
In a meeting at the end of last week, Jeremy Hunt reportedly urged financial institutions to make a change. Both factions of the House of Commons questioned him regarding the disparity between mortgage and savings rates.
The chancellor has instructed banks “in no uncertain terms” to pass on increased interest rates to depositors.
On Friday, Labour and Conservative backbenchers pressured Jeremy Hunt on mortgage relief.
Dame Angela Eagle, who served as a Treasury minister under Gordon Brown, urged banks to cease “profiteering.”
The topic of debate is the rate at which savings account interest rates increase.
MPs wished to know what was being done to ensure that people’s nest assets grew at the same rate as their mortgage payments since both are affected by the Bank of England’s base rate.
Dame Angela noted that banks earned more than “£4bn extra” this quarter as a result of paying out below the current rate of interest while charging borrowers rates close to the Bank of England base rate.
The Bank of England increased the base rate from 4.5% to 5% last week.
Moneyfactscompare.co.uk reports that the average easy-access savings rate was 2.35 percent and the average easy-access ISA rate was 2.47 percent.
The chancellor met with Lloyds, NatWest, Barclays, and Virgin Money executives last week.
Mr. Hunt told Dame Angela, “It is taking too long for the increases in interest rates to be passed on to savers, especially with instant access accounts – the rates are being passed on more frequently to those with fixed notice accounts, but she is correct that there was a problem there.”
“When I met with the banks, I brought up this issue in no uncertain terms, and I’m working on a solution because I believe it needs to be resolved.”
Mark Pritchard, a Conservative member of Parliament, also expressed concern.
He asked the chancellor how interest rate increases could be passed on to depositors.
Mr. Hunt told his party colleague that interest rate increases “can unquestionably be done better than it is currently.”
Robin Walker, another Conservative, asked Mr. Hunt to “encourage banks to pass on interest rates to savers.”
He asked, “Will he acknowledge, however, that with so many people today owning their homes wholly and without a mortgage, increasing the payment for savers is a crucial component of fighting inflation?
“May I wish him continued success in his efforts to convince banks to pass on interest rates to savers?”
Chancellor Jeremy Hunt responded, “Encouraging more people to save is technically anti-inflationary and should be encouraged.”
Inflation can be caused by people who spend money rather than save it, as more people looking to purchase things increases demand and consequently prices.
