Lloyds, TSB and Santander cut current account interest: where next for savers?
Last month, Santander announced it would cut the interest rate on its popular 123 current account from 3% AER (variable) to a flat 1.50% AER on any balance up to £20,000 from 1 November 2016.
This was a hammer blow to its four million account holders but the news wasn’t entirely unexpected following its confirmation that it would review accounts in light of the Bank of England’s decision to cut interest rates to 0.25%.
Ahead of the rate cut, many Santander customers may be thinking about ditching the bank and switching to a competitor.
But in the last few days Lloyds and TSB have also announced cuts to credit interest rates, while Halifax said it would be trimming its monthly reward payments from £5 to £3 from 1 February 2017.
Here’s what’s happening:
Stick with Santander or switch elsewhere?
The question now for Santander 123 customers is whether to stick or twist. For Andrew Hagger of Moneycomms, the answer is not as straightforward as a “yes” or “no” as it will depend not only on your average credit balance, but also whether you take advantage of the 123 cashback option on household bills paid by direct debit.
Below are three comparison tables from MoneyComms to help you decide (click on them to view a larger table).
The table below compares current accounts assuming you only receive credit interest on your Santander 123 account and no cashback.
The table below compares accounts assuming you receive credit interest on your Santander 123 account and £4 per month in cashback.
And this last table compares accounts assuming you receive credit interest on your Santander 123 account and £9 per month in cashback.