UK banks quizzed over 'measly' saving rates offered to customers 

"Savings rates have increased and we always encourage people to shop around," said a spokesperson for bank lobby group UK Finance.

Bank of England: The British base rate was raised to 5% on June 22, the highest since 2008. Picture: Alan Hamilton

British banks faced fresh criticism for the savings rates they offer to cash-strapped customers, in the latest intervention by the UK parliament's influential treasury select committee.

The committee said it had written to the country's so-called Big Four banks — Barclays, HSBC, Lloyds, and NatWest — asking if they believed their savings rates provided "fair value" and if customer inertia, or reluctance to change accounts, was being exploited.

"With interest rates on the rise and our constituents feeling squeezed by rising prices, it is only right that the UK's biggest banks step up their measly easy-access savings rates," committee chairwoman Harriett Baldwin said in a statement. 

The time for action is now."

British banks have come under pressure from MPs and consumer campaigners for not passing on the extent of higher Bank of England rates to savings customers.

The treasury committee had last month criticised easy-access savings rates of between 0.7% and 1.35% at a time when the central bank had raised the base rate to 4.5%. The British base rate was raised to 5% on June 22, the highest since 2008.

Chancellor Jeremy Hunt also said last week that banks were too slow to pass on increases in central bank rates to savers and that the problem needed to be resolved.

Ms Baldwin added she believed banks were failing in their "social duty" to encourage customers to save.

Top executives from the banks were grilled by the treasury committee on savings rates during a session in February.

The banks have previously argued they are increasing savings rates, particularly for fixed-term savings products, and were offering a variety of support to customers struggling in the cost-of-living crisis.

A spokesperson for bank lobby group UK Finance said rates on savings products were determined by a number of factors, including whether someone wanted to have instant access or not.

"Savings rates have increased and we always encourage people to shop around for the product and interest rate that is suited to their needs," the spokesperson added.

The treasury committee said it had also written to regulator, the Financial Conduct Authority (FCA), asking if banks had responded to the pressure applied on them and what enforcement action could be taken under a "consumer duty" coming into force later this month.

The FCA said it would report by the end of the month on how well the cash savings market was supporting savers, and that it had already asked major lenders to explain the extent of their pass-through of interest rates.