The end of high interest current accountsInterest rates slashed on popular bank accounts
12 October 2016
Halifax, Lloyds and TSB will all slash interest rates on their popular current accounts from next year, the banks have confirmed today. This follows Santander’s decision to halve the top rate on its 123 account from 3% to just 1.5% from 1 November.
Who is cutting rates?
- Club Lloyds will pay a flat rate of 2% on balances between £1 and £5,000 (it currently pays up to 4% on balances between £4,000 and £5,000)
- Halifax Reward will pay £3 a month (it currently pays £5 a month if you meet its criteria)
- Halifax Ultimate Reward will cost £12 a month for eligible customers (they currently pay £10 per month if they meet certain requirements)
- TSB Classic Plus will pay 3% on balances up to £1,500 ( it currently pays 5% on balances up to £2,000).
The infographic below illustrates how the rate cuts will affect these accounts.
Where can I find a better deal?
There are still some high-interest current accounts available including a generous 5% on balances up to £2,500 from Nationwide Building Society, although this drops to 1% after the first year. We list the best bank accounts for in-credit interest in our comparison tables.
Other banks and building societies are offering cashback as an incentive to open or retain an account. Read our guide to the best current accounts for cashback and other rewards for all the details.
If you’re looking for a bank account with extra benefits such as travel insurance or car breakdown cover, see our online tables to compare the best packaged bank accounts.
The cuts in detail
This account currently pays tiered rates of interest starting at 1% on your entire balance if you have between £1,000 and £1,999, rising to 2% if you have £2,000 and £3,999 and 4% if you have £4,000 and £5,000.
From 8 January 2017, Lloyds will pay a flat rate of 2% on balances between £1 and £5,000 (customers will continue to benefit from the additional offers and lifestyle benefits).
The only positive news is that the monthly fee will also fall, from £5 to £3, although this fee has always been waived for customers who pay in at least £1,500 every month. Lloyds says this will show in accounts from February 2017.
Halifax Reward and Ultimate Reward
For customers of Halifax and Bank of Scotland the reward payment on its Reward Current Account will drop from £5 to £3 per month.
This will also affect the bank's Ultimate Reward account as customers qualify for the Reward discount on their fee. Halifax currently applies a lower fee of £10 per month, rather than £15, for this packaged account if you pay in £750 per month and have at least two direct debits paid from your account. Once the Reward discount drops to £3 per month in January, the monthly fee will be £12 rather than £10.
The account will continue to cost £15 per month for customers who cannot meet the funding requirements. For Halifax Reward and Ultimate Reward, the changes will affect reward payments made and monthly fees taken on or after 1 February 2017.
TSB Classic Plus and Enhance
Classic Plus currently pays a competitive rate of 5% on balances up to £2,000 but from 4 January 2017 this will pay 3% on balances up to £1,500.
Customers will still earn 5% cashback on the first £100 of contactless payments every month. If they opened a Classic Plus Account before 1 June 2016, they can earn cashback until 31 December 2016. Customers who opened a Classic Plus Account on or after 1 June 2016 will be able to earn this until 30 September 2017.
TSB has also confirmed changes to its Enhance current account - which has been closed to new customers since March 2014. Existing customers are earning 0.75% on balances of £5,000, but from next year they will earn just 0.25% on the same sum.
Both TSB and Lloyds Banking Group (for Lloyds Bank, Halifax and Bank of Scotland) said they will be writing to customers individually to explain the details, providing at least two months’ written notice before any changes take effect.
- See the results of our latest current account customer satisfaction survey
- Our step-by-step guide explains how to switch your bank account
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