More rate pain and a new regulatory Superpower

More interest rate pain this week as the Bank of England hiked rates again by a further 0.25%. This is the fourteenth rise in a row taking the base rate to 5.25%.

For those feeling that they can’t quite take another financial beating, there is small comfort to be found in the pundits here, in Europe and in the US saying that they think we might be at the end of these hikes. At the very least we should see a pause in September to catch our breath.

Earlier this week, the average 2-year fixed mortgage was priced at 6.85%, according to data from Moneyfacts. More expensive mortgages will of course impact demand for property, and this week Nationwide data showed a 3.8% drop in house prices from July last year.

Just when you thought it couldn’t get any worse, beleaguered parents wondering how on earth to get through the long summer holidays should also note this week’s increase in the cost of a bottle of wine. The duty per bottle has risen by 44p, as announced in the budget a few months ago. Bleak news indeed.

Any light at the end of the tunnel?

On Monday of this week, new regulation came into force. Not normally a reason for jazz hands, but bear with! The new ‘Consumer Duty’ is designed to really force providers to understand their customers, think about whether their products and communications are fit for purpose, and to consider whether they are delivering good value.

Before you roll your eyes and yawn, this isn’t just the latest regulation-schmegulation, this is BIG news and it will have an impact on the products and services you get. It should make things clearer, it should force better rates on savings and it may bring some charges down.

Here’s one example. Last Friday, the UK’s largest advice firm – St James Place – showed how seriously it is taking this, announcing a fee reduction for its longest standing customers (in the name of Consumer Duty), which will reduce its net income by £12 million in the last 6 months of the year. Causing its share price to slide by 16% – but the good news for customers is that 65,000 of them will see a reduction in their fees.

This week the regulator is also using its new shiny Consumer Duty Superpowers to ask banks to justify how their failure to pass on rate rises to savers as well as borrowers fits with the fair outcomes vibe (I paraphrase) of these new rules. Cue awkward shuffles.

About 60% of cash savings sit in instant access accounts. And the regulator has identified that the average rate for these accounts in May was 1.25%, compared to the (then) base rate of 4.5%.

No-one can force providers to levy a specific rate. But if they are seen to be “NotVeryConsumerDutery” in their actions, many think the regulator will be swift to find a few scalps. Watch this space.

Have a good weekend everyone.

Holly

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