Banks under pressure to raise interest rates for savers as BoE faces MORE criticism

British Chancellor of the Exchequer Jeremy Hunt holds a Ministerial Statement at the House of Commons in London, Britain, June 26, 2023. UK Parliament/Jessica Taylor/Handout via REUTERS THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY MANDATORY CREDIT. IMAGE MUST NOT BE ALTERED.

BANKS are facing increasing pressure from MPs to raise interest rates for savers in an effort to curb inflation.

Chancellor Jeremy Hunt yesterday hit out at finance chiefs for taking too long to pass on interest rate hikes to savers.

Jeremy Hunt has vowed to pressure banks to pass on interest rate hikes to savers

He vowed to keep putting pressure on bosses and said he’s “working on a solution”.

It comes as the Bank of England last week hiked interest rates to a staggering 5% to try and control the cost of living squeeze.

With inflation stagnant at 8.7% the Bank wants to inflict pain on the economy to force prices down.

However, the rise in interest rates has caused panic among mortgage holders, with some saying they can now barely or no longer afford their homes.

Mortgage rates are now rising by more than saving rates.

The gap stands at 1.65 per cent.

That could mean someone with £10,000 in savings missing out by an additional £50 a year compared to 2019

Mr Hunt told the Commons: “It is taking too long for the increases in interest rates to be passed on to savers, particularly with instant access accounts.

“I raised that issue in no uncertain terms with the banks when I met them and I’m working on a solution because I think it is an issue that needs resolving.”

Yesterday Money Saving Expert Martin Lewis accused banks of acting “beyond the pale” by being stingy about savings.

Mr Lewis told BBC Radio 4: “The banks have been increasing their margins.

“They have not been putting up savings rates commensurately with the borrowing rates.

“So the fact that the banks – who remember we bailed out in 2007 when they were in trouble – are now profiteering by increasing their margins when we the state and the taxpayer is in trouble, seems a little bit beyond the pale for me.”

High street banks insist that while profit margins have slightly improved, they’ve also been squeezed by still having lots of mortgages taken out at much lower interest rates compared to what they now earn.

Meanwhile, the Bank of England is facing increasing criticism over its handling of inflation.

Tory MPs have accused chief Andrew Bailey of being “asleep at the wheel” and too slow to act on interests rates.

Yesterday even the Chancellor admitted the national bank has made mistakes, particularly with its forecasting.

Mr Hunt told MPs: “The Bank of England governor himself has been very open about the fact that their inflation forecasting has not been accurate and they’re conducting an independent review to see how they can do it better.

“It’s clear that there have been some issues with the way that process has worked.

“I think in my dealings with the Bank of England I’ve never once had any reason to question their resolve to hit the target. But we need to make sure the forecasting is better.”

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