High Street banks are failing to pass on interest rate rises to their customers, who are billions of pounds out of pocket as a result, reports have suggested.

Had customer interest rates on savings accounts kept pace with the Bank of England base rate, more than £9 billion would have been paid out.

One bank, Union Bank UK, is paying as little as 0.02 per cent, and the Financial Conduct Authority – the banking regulator – found that 40 per cent of all cash held in easy-access savings accounts with the country’s top nine banks were earning less than one per cent at the end of June.

Across those nine banks, that comes to £260 billion that is sat in accounts with low rates of return, reports The Times.

Co-founder of Savings Champion, a consumer website, Anna Bowes, said: “While some savers will be aware of better rates and are leaving their money with the big banks through inertia, the biggest banks are taking advantage of those who are most vulnerable or unable to move their money by passing on a fraction of rising interest rates.

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“It’s disgraceful that it’s got to the stage where regulators feel they have got to effectively force them to do the barest minimum, while the banks themselves are immediately earning the proceeds from much higher rates.”

The base rate set by the Bank of England had been historically very low for several years but has now climbed to its highest level since 2008.

The base rate itself is 5.25 per cent and the most competitive accounts pay five per cent.

If the £260 billion were moved to easy-access accounts paying 4.5 per cent or higher, of which there are 21, it could earn around £9.1 billion more per year.

Raisin UK co-founder Kevin Mountford, said: “It is clear that many savers are failing to make their hard-earned cash work as well as it could. While people save for different reasons, the lack of action is playing straight into the hands of the big banks.”

After the biggest offender, Union Bank UK, the next lowest rate is offered by the UK subsidiary of Turkish Bank, which only pays 0.05 per cent on its basic savings account. If you have more than £1,000 that rises to 0.08 per cent. Depositing £10,000 sees your rate increase to 0.1 per cent.

The Times reported that Turkish Bank UK held £154.3 million in savers’ deposits at the end of 2022, according to its latest annual results.

Sam Richardson, from the consumer group Which?, said: “Poor rates on savings accounts offered by some of the country’s largest banks have been short-changing customers, potentially by hundreds of pounds a year. It will be up to the regulator to decide what action is most appropriate, but it should leave nothing off the table for firms that continue to fall below the required standards.”

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