For a £5 monthly fee, customers will now earn a flat 1.5% on balances up to £20,000 rather than 3%. There is no change to the up to 3% cashback on bills offer.

When the changes were announced in August, Santander blamed market expectation of interest rates staying lower for longer and increased banking industry costs.

Although a blow for the four million account holders, Jody Baker, head of money at comparethemarket.com, said the halving of the Santander rate could “kick-start people into shopping around for a good deal on their bank account”.

“The push by the Current Account Switching Service to highlight the ease and security of transferring bank accounts is well-timed,” she said.

Kevin Mountford, banking expert at MoneySuperMarket, said the 123 account still offers a competitive package on interest and cashback for customers with larger balances who use it properly but “savers with smaller balances will want to shop around”.

“Santander isn’t the right account for them but Nationwide Flexdirect is a good alternative and there are others out there,” he said.

Nationwide Flexdirect pays 5% annual interest on balances up to £2,500 for the first 12 months, with no monthly fee. After one year, the account reverts to a 1% interest offer.

For more on whether to stick with Santander or switch, click here.