Santander is to slash the interest rate on its popular 123 current account in a major blow to Britain’s beleaguered savers.
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From 1 November the 123 current account will pay a single interest rate of 1.50% on balances up to £20,000, half the 3% amount that it now pays.
But according to some industry commentators, customers should think twice about switching providers until closer to the time the change will be implemented, as many other banks may follow suit and reduce the rates on their own high interest current accounts in the meantime.
After the changes, account holders will need an average balance of at least £4,000 before interest to cover the account’s £5 monthly fee.
Due to the perks on offer, the Santander 123 account has been a stalwart of This is Money’s Five of the best current accounts round-up.
The tiered cashback offering remains unchanged, with cashback of 1pc, 2pc and 3pc available on select household bills. The 123 Lite current account charges a monthly fee of £1 and offers the same cashback scheme, but no interest on in-credit balances.
Following that decision, Santander guaranteed that they would not be reducing interest rates on their savings accounts by more than the Bank’s 0.25% reduction, but made no such promises in regards to their current accounts. “There will undoubtedly be plenty of anger and frustration from customers who now will be faced with scratching around for a 1% return, if they’re lucky, from an instant access savings account, or 1.5% for a one-year bond with no access to their balance”.
The brutal move by the Spanish-owned lender applies to itsflagship 123 current account – advertised by Olympic hero Jessica Ennis-Hill and racing driver Jenson Button.
Santander is also hiking overdraft fees on the account for customers who are in the red by more than £2,000 from January 2017.
But last night experts accused banks of taking advantage of the rate reduction to impose brutal cuts on savers, and warned there is worse to come.
Earlier this month the Bank of England cut base rates from 0.5% to 0.25%, and signalled that there could be further cuts ahead if the economy worsens.
Within the past year it increased its monthly account cost from £2 to £5, causing huge annoyance among customers.
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But the benefits still tended to outweigh the costs, so most of the then 500,000-plus customers stuck with the bank.
