FCA responds to Treasury Committee on high street bank savings rates

• Inquiry: Retail Banks
• Treasury Committee

Following increases in high street banks’ net interest margins, last month the Committee asked what analysis the financial regulator had conducted on whether banks were earning disproportionate profits by increasing rates on mortgages far quicker than on savings products.

The cross-party Committee of MPs also asked what work the FCA had conducted to ensure the UK’s savings market is competitive.

In response, the regulator points to its upcoming consumer duty as a solution to this issue, stating it will require a cultural change in some firms, and outlines it has challenged firms that had made “relatively small increases” and where there was a “material time lag” to pass through the increase in rates.

The Committee has been questioning how the top four retail banks determine what proportion of interest rate rises to pass on to their savings customers. Responses from Barclays UK, HSBC UK, Lloyds Banking Group and NatWest Group can be read in full here.

Commenting on the correspondence, Harriett Baldwin MP, Chair of the Treasury Committee, said:

“The regulator has now given us official confirmation that the UK’s biggest banks are profiting from interest rate rises and that loyal savers are being increasingly harmed. While it’s welcome to hear the financial regulator is monitoring this situation, we will be keeping a close eye to ensure they act on these assurances. Consumers should continue to shop around to get the best rates possible.

“With banks set to release their first quarter results in the coming weeks, we will be monitoring whether firms are continuing to squeeze profits from their loyal savings customers.

Mortgages and re-mortgaging

In the same correspondence, the FCA reveals that the number of people re-mortgaging to secure a better deal has increased since 2016.

The correspondence also reveals the number of mortgages with ‘financial stretch’ – where a household’s mortgage payment is over 30 per cent of their total income - may increase to 356,000 by June 2024, with monthly payments rising by 50 per cent or more for 67,000 mortgage holders.

The regulator states that 90 per cent of consumers with mortgages exposed to interest rate rises are not expected to become financially stretched.

Further information:

• The Committee held an evidence session with the chief executives of Barclays UK, HSBC UK, Lloyds Banking Group and NatWest Group on 7 February. Further information about the session, a video replay and transcript, can be found here.
• The Committee Chair’s letter to the Chief Executive of the Financial Conduct Authority can be read here. The response can be read here.

Further information

• About Parliament: Select committees
• Visiting Parliament: Watch committees

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