Martin Lewis on best accounts for saving to buy a house
Anger is growing at “greedy” banks’ refusal to pass on higher interest rates to savers. They are accused of “shoddy” behaviour towards millions of customers by offering rock-bottom rewards that are little better than a “joke”. While the cost of mortgage borrowing has shot up, savings rates have not kept pace. In December 2021 the Bank of England base rate started rising from a historic low of 0.1 percent. It now stands at 4 percent.
But the typical rate paid on an easy access savings accounts is up by just 1.53 percent.
Anna Bowes, co-founder of Savings Champion.co.uk, added: “This shoddy behaviour of not passing on base rate hikes to their long-suffering customers is nothing new. “The high street banks in particular are notorious for passing on as little of any base rate rises that they can get away with.
But when the base rate has risen by 3.9 percent since December 2021, it’s still shocking to see how little of this has been passed on to long-suffering and desperate savers.
“They know that however badly they treat their customers, the majority are unlikely to switch.”
Yet the Big Four banks raked in almost £20billion profits in the first nine months of 2022: Barclays made £4.6billion, HSBC £8.9billion, Lloyds Banking Group recorded £3.9billion and NatWest Group totted up £2.2billion.
Certified money coach Fanny Snaith said: “Are the banks being greedy? I think so. The Lloyds cash ISA is at 0.6 percent for balances up to £25,000. It’s a joke, but nobody bar Lloyds is laughing.
“Offering that product is treating the customer with disrespect. Other accounts offer higher interest rates but they are still pretty low or tagged with confusing rules.
“The Club Monthly Saver offers 5.25 percent, which sounds good but … you can only pay in up to a certain amount and you have to pay a fee for the current account. Sort it out banks, and make saving simple and worth our while.”
The typical rate paid on an easy-access savings account is up by just 1.53 percent (Image: Getty)
Barclays and Santander raised standard easy access account rates by just 0.49 percent in 14 months as base rose by 3.90 percent – they pay customers just 0.55 percent AER. Yet if banks and building societies deposit their money in the Bank of England they qualify for the full base rate of four.
Ms Bowes, right, added: “The bottom line is that banks are businesses. If they can increase the rates on money they are lending or saving by more than they increase the rates they are paying savers, they can improve their profit margins.”
Bank bosses grilled by Treasury Committee MPs this week were accused of failing to pass on the benefits of higher rates. Dame Angela Eagle, Labour MP for Wallasey said: “There’s some cynicism among my constituents that all of you … seem to be much better at putting up interest rates on borrowers on mortgages than giving back some money to those who are savers.”
High street banks’ annual financial statements due in the next two weeks are tipped to come in higher due to dearer borrowing.
Bank of England rate-setters on its Monetary Policy Committee put up base by 0.5 percent to four a week ago – the 10th consecutive rise as the central bank attempts to curb inflation.
Although savers – many elderly and relying on returns on their nest eggs to boost fixed incomes – are still awaiting significant rate rises, mortgage payers find that loan payments go up overnight.
Cameron Parry, boss of savings app TallyMoney, accused banks of “double standards. They’ve been painfully slow to pass on interest rate increases to savings customers. Frustration is what’s driving the public grilling of the bank bosses.” Kevin Mountford, co-founder of savings platform Raisin UK, said: “With interest rates at the highest level for 14 years and with further increases expected we can expect decent rates in place for savers.
“In the current cost-of-living crisis, many customers are being left with less and less, with savers being disadvantaged.” Even when rates have risen, it has been marginal: Barclays gave 0.01 percent interest on December 1 2021 on its Everyday Saver, when the base rate was 0.25 percent. Now it offers 0.75 percent – still 3.25 percent below the base rate. This is the same for Halifax and Lloyds on Everyday Saver and Easy Saver accounts.
Nottingham Building Society tweaked up its variable rates from 1.15 percent to 1.6 percent.
Labour MP Siobhain McDonagh, a member of the Select Committee, said: “You can’t have it both ways, and customers are being left with even less during a cost-of-living crisis. The high street providers are paying as little as they can get away with. They are cashing in and taking unfair advantage of savers.”
Lenders questioned at the Treasury meeting denied that they had focused on profits over customer welfare, pointing to their “competitive” products.
Alison Rose, NatWest chief executive, said: “Our Digital Regular Saver [account], which is paying five percent [in interest rates] is encouraging people to build that savings habit.”
Yet it plunges to only 0.65 percent on more than £5,000. A NatWest spokesman added: “Since 2020, we have helped 1.7million customers save £100 or more for the first time. Our Digital Regular Saver account, which pays a market-leading rate, is helping over a million customers.”
HSBC said: “Our savings accounts are competitive and cater for the different needs of savers.”
Jeremy Hunt (Image: Getty)
Tories urge freeze on corporation tax to boost growth
Senior Tories have called on Jeremy Hunt to freeze corporation tax to revive Britain’s ailing economy, writes Sam Lister, Daily Express Political Editor.
Official figures released on Friday will confirm whether the country is in recession or has escaped. Conservative MPs urged the Chancellor to be bold in his upcoming March budget to help drive growth.
Ex-Cabinet minister Jacob Rees-Mogg said cutting corporation tax in the past had increased the amount paid into Treasury coffers.
He said: “Lower rates generate more income. This comes both from the benign economic effect of lower rates and from an element of tax competition which encourages companies to declare profits in this country rather than in higher tax ones abroad.”
Corporation tax will rise from 19 percent to 25 percent in April for larger businesses.
Ranil Jayawardena, former Environment Secretary and founder of the Conservative Growth Group said Mr Hunt should “give more thought” to current corporation tax plans.
He said: “Higher corporation tax will deter the investment we need across the country.”
Conservative MP Jonathan Gullis said: “It’s time to give businesses the helping hand they desperately need.”
CBI director general Tony Danker said the budget should be “an opportunity to get the UK out of any recession sooner rather than later and transform the UK into a high-growth, innovation-first economy”.
The Treasury insisted most businesses are too small to be hit by the higher rate of corporation tax and received significant help during the pandemic. A source said: “After borrowing £400billion to support the British economy during the pandemic, it’s only fair that the very largest businesses contribute a little more.
“Even after the tax rise, the UK will still have the lowest corporation tax in the G7, and over 70 percent of UK businesses won’t see any tax increase at all.”
Policymakers at the Bank of England have said inflation is almost “guaranteed” to come down rapidly this year unless there is an unexpected global event. Andrew Bailey, the Bank’s governor, told MPs during the Treasury Committee that he is “concerned” about the continued persistence of inflation, but expects the rate to halve this year.
Meanwhile, the government’s net zero tsar warned the UK could turn its back on a trillion pounds of investment by 2030 and almost half a million jobs if it does not seize the economic opportunities of tackling the climate crisis.
Conservative Chris Skidmore told MPs: “We’re now in a global net zero race and we can either continue to lead, or we will follow. The cost of following will always be greater.”
Comment by Jacob Rees-Mogg MP
The announcement by AstraZeneca that £320million of investment has been lost by the UK to the Republic of Ireland is a reminder of Edmund Burke’s words: “To tax and to please, no more than to love and to be wise, is not given to men.”
The great Tory philosopher words resonate down the generations. Nonetheless, some taxes are better than others and among the worse is Corporation Tax.
Governments are drawn to taxes that do not appear to hit individuals. From 1997 to 2010, Labour made the imposition of stealth taxes an art form.
In a global economy with the free movement of capital, Corporation Tax is damaging to the UK. In deciding where to set up a headquarters or a factory, it is not turnover or gross profit that matters but the cash that will ultimately belong to shareholders. High Corporation Tax will deter job-creating investment.
Global firms that have set up operations in a country that raises this tax will not necessarily vamoose. This can fool governments into thinking there is a free hit on existing businesses, even if they know further investment is less likely. But because international companies are interested in their net – after-tax – return, they will adjust their business model to offset the tax increase. This means increasing prices or cutting costs.
In an inflationary era, increasing the likelihood of price rises is unhelpful, while making the job market weaker is always a bad policy. Because of low investment, potentially higher prices and lower employment, increasing this tax is economically damaging. Worse, it also hits the Treasury in the pocket.
George Osborne, as Chancellor of the Exchequer, cut the Corporation Tax rate from 28 percent to 19 percent. Revenue then rose from £43billion to £67billion between 2010/1 and 2021/2.
The Government ought to learn from his wisdom and cancel the Corporation Tax rise. It would help balance the books, stimulate growth and attract the investment of firms such as AstraZeneca.
Comment by Sarah Coles – Hargreaves Lansdown
Big high street banks know they have a captive audience when it comes to savings.
Our research found that when people are picking a savings account 47 percent don’t bother shopping around – they just open it with whoever they have their main current account with.
It’s largely because our priorities are ease of opening and simplicity of withdrawing the cash – which we prize above a decent interest rate.
It’s why the vast majority of our savings are stuck on the high street earning a dismal rate of interest. This is an expensive mistake, because the High Street giants are lagging horribly behind when it comes to savings rates.
Typically, easy access accounts in a branch and without restrictions pay around 0.65 percent, and even the most generous pay less than one percent.
This is a fraction of the best rates available from smaller and newer banks online, which are offering more than three percent on easy access cash.
You might be tempted to stay put, in the hope that eventually the high street banks will pass better rates on. You’d be forgiven for thinking that because rate rises feed through into variable rate mortgages at lightning speed, it’s unjust that banks sit on their hands for months with savings.
However, they only have to offer savings rates good enough to attract the cash they need. The fall in new mortgages since rates shot up after the mini-Budget last autumn means they don’t need as much cash to back mortgages.
And they’re still sitting on piles of lockdown savings.
The smaller and newer banks, meanwhile, are keen for you to save with them.
According to the Bank of England, the average easy access rate in December was 0.83 percent – compared to a year earlier when it was 0.09 percent. If your cash is languishing it’s a good time to see what else is out there.
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