UK banks face regulator amid ‘profiteering’ claims; Bank of England says some retailers are overcharging – business live | Business

You can watch Andrew Bailey’s interview with Newsround here (or show it to the kids later).

In it, the Bank of England governor explains how the BoE has four floors of gold underground, the “second largest store of gold in the world”, and that it’s job is really about money.

He says:

“We make it, we print it, we issue it – we have £80bn of bank notes in issue….

Every day around £750bn of payments get settled through the Bank of England.

Newsround point out that many children are only now learning about mortgages, as their parents are worrying about rising payments.

Q: Are you hearing that kids are struggling at home?

“Yes”, Bailey replies, before defending the current cycle of interest rate increases.

He says:

Inflation is way too high.

We have a target that prices should rise by no more than 2%. It is, sadly, above that at the moment, above 8%.

I understand it is difficult. People are having to make very difficult choices about what they buy, what they need for their lives.

Q: Are young families dealing with this the most, compared to older people ?

Andrew Bailey says that it’s true, around the world, that that younger people tend to borrow more money, while people tend to save more as they get older.

Bailey says he does feel the impact on younger familes, and understands the impact of higher interest rates on people.

It will have more of an effect on young people, younger families. I do understand this.

We want to get inflation back to where it needs to be, and then we can asset what level interest rates should be at.

If inflation isn’t tackled now, it gets worse, he added.

Bank of England governor Andrew Bailey had fired a warning shot at retailers engaged in greedflation, by warning there is some evidence that retailers are overcharging customers.

Bailey has given an interview to the BBC’s Newsround programme, in which he said there are some issues to tackle on overpricing

The governor said:

If you look at petrol prices, some sellers of petrol have possibly been charging too much for it.

Regulators have an important role to play tackling overcharging, Bailey added.

It helps us with inflation, but it’s just fairer if these things are tackled.

This is having very difficult effects. So it’s important that these steps that can be taken to make things fairer, and to save money for people by doing so, are taken.

Earlier this week, the Competition watchdog said drivers were paying more for petrol and diesel than before the Covid pandemic because of “weakened” competition.

Bailey also warned his audience of young people that chocolate bars are likely to keep rising in price, even if inflation falls, due to the surge in sugar prices.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Britain’s biggest banks are heading for a showdown with the financial regulator today, to explain why UK savings rates are lagging behind the surging cost of mortgages.

Bosses from HSBC, NatWest, Lloyds and Barclays are expected to attend today’s meeting with the Financial Conduct Authority.

The meeting comes amid rising concerns that banks are profiting by offering paltry savings rates to customers, despite 13 increases in UK interest rates since December 2021.

The FCA called the banks in as part of its investigation into the savings market, with a report due later this month. The regulator’s executive director of consumer and competition, Sheldon Mills, who will lead the meeting, also hopes it will focus minds before the FCA’s new consumer duty regulations come into force at the end of July, the Guardian understands.

The new rules will require all City firms including banks to explain pricing decisions, including how quickly they raise savings rates, and show they are acting in good faith and prioritising customer needs.

Critics of the banking sector point out that they have been much faster to raise mortgage costs than to pump up savings rates, as the Bank of England has raised interest rates to their current level of 5%.

This has helped the banks swell their net interest margins (the different between interest paid and interest received) this year.

Instant access savings accounts are a particular concern.

Data from Moneyfacts yesterday showed that the average easy access savings rate today is 2.48%, compared to 4.8% for the average 1-year fixed savings rate.

The average 2-year fixed residential mortgage rate today is 6.51%.

The banks, though, can argue that savings rates are set independently to mortgage products (the latter are priced off the market in UK government debt, or gilts).

MPs are also taking a keen interest in the banks over this issue. Earlier this week the Treasury Committee accused the high street banks of failing in their “social duty” to promote saving and instead engaging in “blatant profiteering” by continuing to offer paltry rates.

Harriett Baldwin MP, chair of the Treasury Committee, said earlier this week:

“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.

The time for action is now.”

Mortgage borrowers face more pain in the months ahead, with some experts predicting that two and five year fixed mortgage rates could hit 7 per cent by the end of the summer, the i newspaper reports.

Yesterday, JP Morgan warned that the Bank of England might need to push interest rates to as high as 7% to tackle stubbornly high inflation, in a worst-case scenario.

The agenda

• 8.30am BST: Eurozone construction PMI report for June

• 9.30am BST: UK construction PMI report for June

• 10am BST: Eurozone retail sales for June

• 1.15pm BST: US ADP payroll report on private sector job creation

• 3pm BST: JOLTS survey of vacancies at US firms