Savers have missed out on an estimated £6.8bn in interest payments because the big banks have failed to pass on full interest rate rises since December.
MPs across the political spectrum have called on providers to do better and pay savers what they deserve.
The Bank Rate was increased from 2.25pc to 3pc on Thursday, the biggest rise in 33 years. The rate has now gone up by 2.9 percentage points since December last year, when it was 0.1pc.
With the rate now at its highest level since 2008, savers are enjoying their best returns in more than a decade – but the rates they earn are still well below the Bank Rate.
The average easy-access savings account pays 1.16pc, up from 0.2pc in December, according to Moneyfacts, an analyst.
The big high street banks are offering savers some of the lowest rates on the market, with the average at just 0.4pc, according to Hargreaves Lansdown, an investment firm. In early December they paid an average of 0.01pc.
Despite these dismal returns, they continue to dominate the savings market. The big banks hold about two thirds of easy-access savings, which are worth £907bn in total, according to UK Finance, the banks’ trade body.
The big banks have paid savers £1.3bn in interest as they gradually raised their rates over the past 11 months, Hargreaves Lansdown said. But this is a fraction of what they would have paid if they had passed on the increases in the Bank Rate.
If they had passed on rate rises in full, they would have been paying 2.16pc last week, resulting in total interest payments of £8.1bn since December. That represents a gap of £6.8bn.
Among the big banks, Santander offers the lowest easy-access rate, 0.2pc on its Everyday Saver account. The Barclays Everyday Saver account pays 0.25pc on sums of less than £100,000.
Someone with £50,000 in the average high street account will lose interest of £1,205 a year if they do not switch to the top easy-access account, which pays 2.81pc.
Customers of NS&I fare a bit better, but are still not getting the full benefit of interest rate rises. The rate on its easy-access Income Bonds account was raised to 1.81pc this month and its Direct Isa offers 1.75pc. The Premium Bond prize rate increased to 2.2pc last month, but not all savers will earn this much.
The government-backed institution has traditionally played a big role in increasing competition in the banking sector, according to Hargreaves Lansdown. But Sarah Coles from the firm said NS&I was on track to meet its funding target – the deposits it attracts help pay for government spending – and was therefore unlikely to raise rates further to attract more cash.
Laura Suter of investment service AJ Bell said high street banks also had huge deposits and did not have an incentive to raise rates.
She said: “If people are happy leaving billions of pounds in accounts that pay little interest, why would the bank offer to pay more? Until savers vote with their feet and move their money to get better rates, the banks don’t need to offer more attractive deals.”
In total, £1.8 trillion is held in commercial banks other than NS&I. The total amount of interest that savers have missed out on could be as high as £12bn, said AJ Bell, which used the average easy-access savings rate to arrive at its estimate. The figure is an approximation because some of the £1.8 trillion may be in fixed-rate accounts while other money will be in current accounts that pay no interest.
Meanwhile, inflation is at 10.1pc, which is eroding the value of savings. Since December savers will have lost an estimated £129bn in real terms, AJ Bell said. Someone with £50,000 in savings in the average easy-access account has lost £3,680 since December thanks to inflation.
Anthony Browne, a Tory MP and member of the Treasury select committee, said banks “must do the right thing” and pass on interest rate rises to savers.
He said: “If savers are getting a raw deal, it is a sign that competition is not working well in the banking sector.” He said the Financial Conduct Authority (FCA), the regulator, “should keep a beady eye on the banks to check they are not taking unfair advantage of savers, and if necessary it should step in”.
Emma Hardy, a Labour MP and another member of the committee, said the Government should strengthen the FCA’s powers in its Financial Services and Markets Bill, currently passing through Parliament.
She said she had tabled amendments to the Bill that would give the FCA “a must-have regard to financial inclusion which would protect consumers – particularly the most vulnerable – from practices such as this”.
She said it was unfortunate that the FCA had shelved proposals to require banks to set a single savings rate across all of their easy-access accounts. The FCA says it will continue to monitor the market and may revisit its priorities if it sees “significant harm” to consumers in the future.
Barclays said it was committed to providing a “range of options to help (customers) save for their goals” and “regularly reviews” its rates. Santander said it will increase its Everyday Saver rate to 0.4pc on Dec 2.