Apache is functioning normally

The boss of a banking group has been accused of being ‘out of touch with reality’ for suggesting mortgage rates should be even higher.

David Postings, chief executive of UK Finance, said he rejected the idea that the biggest banks were ripping off customers – and claimed individuals could still find attractive rates if they ‘put some thought into it’.

His comments come despite a number of senior public officials saying savers should receive better rates. Lenders have been criticised for making measly increases in rates offered to savers while ramping up borrowing costs for mortgage holders.

Chancellor Jeremy Hunt and Bank of England Governor Andrew Bailey have backed calls for banks to offer better returns.

Mr Bailey said on Wednesday it was ‘important that rates get passed through’. But Mr Postings, who leads Britain’s banking and finance lobby group, told the Mail that lenders have not acted badly.

He said banks’ net interest margins – the gap between borrowing and saving rates – were not ‘egregious at all’. That is despite the biggest lenders raking in £44billion last year by raising borrowing rates by more than they pay savers. Mr Postings said: ‘I don’t think that banks are profiteering.

‘Net interest margins have improved a bit, but if you go back to pre-pandemic, they are not much higher than they were then. The market is ok.’

Mr Postings suggested banks could actually be earning more on mortgage rates, which have spiked since the Bank increased its benchmark from 0.1 in December 2021 to 5 per cent today. The average rate on a two-year fixed-term mortgage deal rose to 6.78 per cent yesterday, according to financial website Moneyfacts. Despite this, Mr Postings said banks’ mortgage margins have been ‘compressed significantly’.

‘Mortgages should be priced higher than they currently are. Obviously, nobody wants that,’ he said.

A backlash over his comments was led by Labour’s Dame Angela Eagle, a member of the Commons Treasury committee, who said they were ‘self-serving’ and ‘out of touch with reality’.

She added: ‘The system is geared to build profits for banks. What they’ve made on the difference between what they pay borrowers and savers, there are billions of pounds of extra profits.’ Dame Angela also criticised Mr Postings’ remark that savers could find better rates ‘if prepared to put some thought into it and move money around’. She said families should not be expected to ‘spend all their spare time’ looking at rates.

There has been a growing chorus for the main lenders, including Barclays and HSBC, to do better for millions of customers who are seeing the value of their savings eroded by high inflation. MPs on the Treasury committee have been questioning banks on the issue since earlier this year but complained last week that rates still seemed too low.

They noted that the rates on easy-access savings accounts at the big four banks were between 0.9 per cent and 1.7 per cent. The MPs questioned whether customers were being offered fair value or instead being ‘exploited’ because of their loyalty. Mr Hunt last month accused banks of dragging their feet on the issue and pledged to take action to get a better deal for savers.

This was followed by a meeting between bank bosses and the Financial Conduct Authority earlier this month when the regulator urged lenders to raise rates for savers.

Smaller banks have also criticised rivals for profiteering. There has been some progress since the FCA summit with signs that savings rates have started to improve.

Atom Bank chief executive Mark Mullen told this newspaper it drove him ‘bloody bananas’ when ‘hand-wringing bankers talk about supporting customers but are not passing on interest rate rises to savers’.

Jenny Ross, editor of Which? Money, said: ‘The FCA must continue to monitor the situation to ensure banks do the right thing and pass on higher interest rates to savers – and take tough action should firms continue to drag their heels.’