Santander has announced it will be slashing the interest rate of a popular savings account in a blow to its customers.
Last week, the bank confirmed the rate offered on its off-sale, variable Easy Access Saver Limited Edition (issue three) account will change.
Currently, the savings account is paying an interest rate of 5.20 per cent AER on balances up to £250,000.
However, this high street lender is reducing this product’s savings rate to 4.20 per cent AER from May 20, 2024.
Ahead of this date, Santander is in the process of contacted Easy Access Saver customers to provide them with two months’ notice.
Despite this reduction, the bank claims the account will still offer a “near top of the market return” for savers.
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The bank is slashing interest rates on savings accounts
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In its announcement of the change, Santander blamed the interest rate cut on “current market conditions”
Despite the rate being cut, the lender stated that all other terms of the account will remain the same going forward.
Furthermore, customers will still be able to access their money at any time they want without any changes.
The Easy Access Saver Limited Edition (Issue 3) was recently launched by Santander back in September 2023.
Savers have benefited from the Bank of England’s decision to raise the UK’s base rate in its ongoing fight against inflation.
Since August 2023, the central bank has increased interest rates to 5.25 per cent which has been passed onto bank and building society customers.
With inflation easing to around four per cent, analysts are betting on the base rate to be cut in the later half of the year.
Ahead of this move by the financial institution, many banks are withdrawing high interest accounts from sale or cutting interest rates.
Despite this, experts are highlighting that easy access accounts are “still thriving” in a changing environment.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, explained: “The savings market continues to offer a variety of options for consumers with different aspirations.
“Those who need quick access to their cash will be pleased to see returns on easy access accounts are thriving.
“Despite significant drops on fixed rate accounts, variable rates have been relatively stable or indeed risen over the past six months.
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The Bank of England base rate is at a 15-year high of 5.25 per cent GB NEWS“It is worth noting that the last base rate rise was back in August, so many providers would have passed on any rise to consumers by now, so more recent booms are more linked to providers’ attempts to draw in new business.”
However, she noted that a potential cut in interest rates from the Bank of England will likely lead to diminishing returns for customers.
Springall added: “As we have seen in the past, any cuts to base rate, or indeed expectations for interest rates to drop, can have a notable impact on variable savings rates, so it will be interesting to see how resilient the market will be in the months to come.
“Savers must not be apathetic and assume they are benefitting from rate rises on their existing account. It is imperative consumers are proactive to review and switch their savings account if their loyalty is not being rewarded.