Plum pushes for equitable savings rates from UK banks following the Bank of England’s rate increase to 5.25%.
The Bank of England recently raised interest rates, and as a result, they are at 5.25 percent. While interest rates on loans and mortgages have increased correspondingly, costing UK citizens more money, most UK banks have been hesitant to raise the rates on savings accounts by the same amount, if at all. App for smart money Plum is now pleading on banks to stop making ill-gotten gains and return interest to depositors.
Due to stagnant savings interest rates, the majority of UK customers are currently feeling undervalued and finding it difficult to maximize their financial resources. According to recent study by Plum, the average British citizen is only receiving 3.3% interest, which is much less than the base rate of 1.95 percent.
This indicates that UK consumers lose out on £478 in interest annually on average, which adds up to £17 billion for all UK saves.
The Financial Conduct Authority (FCA) unveiled its 14-point strategy in July to make sure building societies and banks give savers access to interest rates. In spite of this, a lot of savings account interest rates remain same from before this strategy.
Although the FCA is expected to take strong action against businesses who do not provide justification for their pricing decisions by the end of 2023, this threat has not yet provided the immediate pressure that consumers need and demand.
Despite switching to better interest rates, 77% of savers have not done so. Despite 71% of respondents believing bank profits were excessive, their current bank (30%) and similar bank rates (28%) were the biggest barriers. Most people saved for emergencies (49%), followed by holidays (44%). For those under 45, saving for a home down payment or improvements was the primary motivator (47%), while those 55–64 prioritized retirement (51%).
Discounting client savings
“UK banks have been sluggish in boosting interest rates on savings accounts, but they have been quick to increase interest rates on loans and mortgages,” stated Victor Trokoudes, founder and CEO of Plum.
“We are currently experiencing a crisis related to the rising cost of living, and consumers are still facing financial strain.” Therefore, it truly disappoints me to see that many banks are not giving their customers more of this money back, thereby undervaluing their hard-earned savings.
“Although the FCA has promised to act by the end of 2023 to stop this behavior, this is by no means a panacea. The fact that savers receive little benefit while borrowers pay more shows how the major banks’ business models are fundamentally at odds with their clients’ needs.
Since December 2021, the Bank of England has raised interest rates fourteen times, and they are anticipated to stay high. It is crucial that the public understands that they do not have to put up with this and let banks take advantage of their deposits. To help their money work harder, we’ll be launching a new service that more accurately reflects these base rate adjustments.
In addition to helping customers set away £2 billion, Plum is introducing a new product that will enable them to generate better returns that are more in line with the base interest rate established by the Bank of England.
