High street banks have failed to pass on the Bank of England's latest interest rise to millions of savers, leaving their customers stuck with rates as low as 0.01pc.
The country’s 10 largest banks have still not yet raised rates on their easy access savings accounts following a 0.5 percentage point increase in the base rate two weeks ago, the biggest rise in 27 years.
MPs last night rounded on the banks and said struggling savers needed to be paid a fair rate on their money.
The Bank of England increased rates to 1.75pc earlier this month, but nine of the 10 big banks and building societies still pay savers interest of less than 0.5pc, according to analysis for The Telegraph by data firm Moneyfacts.
Barclays is the worst offender with its Everyday Saver account, which is still paying just 0.01pc on balances below £50,000 – meaning a saver would get just £1 a year on a £10,000 deposit.
The bank said it would raise the rate next month, but only to 0.15pc.
It comes as inflation is expected to soar to 13pc this year, meaning the real value of cash savings is being fast eroded.
Mel Stride, chairman of the Treasury select committee of MPs, said it may have to investigate whether or not banks were playing fair. He said: “With inflation eating away at people’s money, it’s all the more important that people get the best return possible on their savings.
“It’s therefore disappointing that some banks don’t appear to be rising to this challenge. This is something the Committee may want to look at.”
The Bank Rate was reduced to a record low of 0.1pc at the start of the pandemic, and banks were quick to slash rates to a bare minimum on easy access savings accounts.
The Bank of England has now raised rates on six consecutive occasions since December.
And banks have been quick to pass on the rate rises to mortgage borrowers, with the average standard variable mortgage rate rising from 4.4pc to 5.17pc this year.
As a result, the gap between savings and mortgage rates is now the largest for 15 years. Andrew Bailey, Governor of the Bank of England, has said he is “watching very carefully” to see if banks passed on increases fairly.
Santander’s Everyday Saver account pays 0.1pc, while Nationwide’s Instant Access Saver pays 0.18pc. Royal Bank of Scotland, Lloyds Bank, HSBC and NatWest are all 0.2pc. It has fallen on the smaller banks to raise rates for savers, with the average easy access rate on the market now at 0.7pc. The highest rates available are over 1.5pc.
Tory MP Kevin Hollinrake, chairman of the cross-party group on fair business banking, said City watchdog the Financial Conduct Authority should do “as much as it can” to ensure that savers were getting their money’s worth.
He said: “Simply collecting the cash and profiting from a situation when you're seeing many people in extremely difficult situations is entirely wrong and can in no way be construed as treating their customers fairly.”
Harriett Baldwin, a Conservative member of the Treasury Select Committee, said: “We need a competitive banking sector in the United Kingdom and that requires us as consumers to shop around for the best savings rates in the same way that we shop around for the best price at petrol stations.”
Laura Suter, of the investment platform AJ Bell, said most consumers could get a far better savings rate by switching to lesser-known banks, which are “hungry for new business”.
She said: “There has been a rates war in the savings market since the Bank Rate started rising but the high street banks are nowhere near it, instead preferring to sit on the sidelines and bank on people’s apathy that they won’t move their savings elsewhere.”
Some banks told The Telegraph that they planned to increase savings rates in September, but the rises promised were all still less than this month’s 0.5 percentage point rise in the Bank Rate.