For the last couple of years the Santander 123 current account has been the stand out option for beleaguered savers – paying 3% with instant access up to £20,000 – it was too good to be true in the current depressed savings market – the only surprise is that this decision to trim the rate didn’t happen at least 12 months ago.
This oasis in the savings desert is about to disappear and the reality of the UK savings rate crisis will now hit home for those who have been banking on 123 to earn a reasonable interest income from their nest egg.
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 1.50% for a one year bond with no access to their balance.
Clearly the economics no longer stacked up for Santander but with base rate teetering towards zero it may not be the last bank to lower its ‘in credit’ current account rate.
There are other current accounts paying above average rates on credit interest however the low maximum balance limits make them much less attractive – e.g TSB Classic Plus 5% up to £2,000, Tesco bank 3% up to £3,000 and Lloyds Bank (Club Lloyds) 4% between £4,000 and £5,000.
The Santander 123 rate reduction doesn’t kick in until 1st November so it may be worth customers checking what’s still on offer nearer the time rather than rushing to switch away now.