ALEX BRUMMER: As interest rates rise, savers need to get a better deal
High Street banks wasted no time passing the agony of higher interest rates onto their customers.
Many made fixed-rate mortgage deals more expensive even before Andrew Bailey delivered his quarter-percentage-point hike to 1.25%.
For the roughly 2 million homes with trackers, which move with the market, the pain will be felt immediately.
Rejected savers: Banks are using rising borrowing costs as a chance to improve their interest rate spreads. It’s their own version of greed
Commercial banks have developed their own version of the rocket and feather pricing approach favored by energy providers.
Increases in interest charges for mortgages and other loans are passed through quickly. Savers, who vastly outnumber borrowers, must expect a benefit, if any.
Most of the time, banks use rising borrowing costs as a chance to improve their interest rate spreads. It’s their own version of ‘greed’.
The main exceptions are financial groups looking to establish a presence in the UK, such as JP Morgan’s online bank Chase.
Building societies like to demonstrate mutual benefit, with Yorkshire matching the old lady of Threadneedle Street with a savings rate of 1.5%.
Thanks to an interesting analysis by the radical New Economics Foundation (NEF) think tank, we now know that with every rise in interest rates, commercial banks get a free lunch from the Bank of England.
Since the 2009 financial crisis, banks have been receiving interest payments on reserves held with the Bank of England.
NEF economists estimate that based on the current path of interest rates, some £57.03 billion in deposit interest payments will be transferred from the Bank to High Street lenders by 2024.
The NEF thinks this money could be better spent on social benefits (in a time of painful inflation) or retrofitting homes for a greener future.
An alternative approach could be for the authorities to step in and suggest that this interest rate windfall be used to boost returns for savers, who have suffered serial abuse since the financial crisis as a result of the quantitative easing program. of £895 billion from the Bank and the record bank interest rate. assess. This would be a great opportunity for banks to reward savers for their patience in difficult times.
Out of sight
IAG general manager Luis Gallego has his lucky stars to thank.
His potential £4.7million salary package, if all targets were to be met, was approved by shareholders despite 25% investor dissent. He just avoided being listed on the UK public pay offenders register.
By holding the annual general meeting in Madrid, Gallego and the IAG board have managed to escape stakeholder scrutiny of its management of British Airways.
Efforts by a Mail reporter to gain access to the meeting were rebuffed with calls going unanswered or cut off.
In this case, it was not so disappointing because amidst all the disruption at airports and in the skies – and a threat of summer pilots’ strike against BA by the pilots’ union Balpa – there was no only had two questions at the AGM.
On the substantive issue of technical and personnel issues, which made the trip from Heathrow a misery, Gallego hinted that it was because leave in Britain was somehow less than in Spain, saying ” we had to lay off staff”. Capacity has been reduced by 10%.
Shareholders have few opportunities to engage directly with management, so a general meeting in Madrid is far from ideal.
Also, as anyone trying to communicate with BA will know, phone calls go unanswered, responses to emails are short and unhelpful, and Covid-19 is blamed for all sorts of ills. The late Lord King, architect of the world’s favorite airline, would be appalled.
Halma, an Amersham-based safety and health group, is an easily overlooked FTSE 100 performer. Under the 17-year-old leadership of chief executive Andrew Williams, who is resigning, the group’s market value has fallen from £500million to £7billion.
His model of a loose confederation of companies across the world appears to be working and perhaps inoculates him against the private equity predators who hunt down the lower parts of the FTSE.
They might also be put off by the fact that Halma spends 5.6% of its revenue on R&D. Investing is never popular among financially motivated businesses.
Profits at £300m continue to rise and investors have been rewarded with a 43rd year of a 5% dividend increase.
New boss Marc Ronchetti, now in charge of finance, will be challenged to maintain this record in turbulent times.
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