Nationwide is cutting its market-leading 5% AER interest rate on its FlexDirect current account for the first time since its launch in 2012.
The building society says the rate will be reduced from 5% AER to 2% AER from 1 May 2020 as a 'direct result of ultra-low interest rates'. This is following the Bank of England's (BoE) emergency move to cut the to temper the impact of coronavirus on the economy last month - taking it to the lowest level ever.
Nationwide also announced that it will cut interest rates on its savings accounts and Isas, noting that it has made these changes so it can ensure it continues to support its 16 million members and 'preserve the long-term sustainability of the society'.
Here, Which? explains what the changes mean for your money and looks at whether other banks could follow suit.
From 1 May, current account holders will earn credit interest of 2% AER (1.98% gross) on balances of up to £1,500 for the first year, falling to 0.25% AER (0.24% gross) on balances up to the same amount after that.
This is instead of 5% AER (4.89% gross per year fixed) on balances up to £2,500 for the first 12 months ( provided you pay in £1,000 per month) and 1% gross per year/AER variable after that.
However, any FlexDirect accounts applied for prior to 1 May will continue to receive credit interest of 5% AER (4.89% gross) on balances of up to £2,500 for the remainder of their 12-month introductory period.
Any existing FlexDirect members outside the introductory period will have their credit interest rate reduced to 0.25% AER, on balances of up to £1,500 from 1 July, from 1% AER.
Meanwhile, Nationwide's FlexStudent and FlexGraduate accounts will no longer offer credit interest from 1 July 2020, while the credit interest on its FlexOne account will be reduced to 0.1%, affecting both existing account holders as well as anyone opening these accounts from that date.
The changes come after Nationwide announced last summer that its FlexPlus packaged current account, which comes with a monthly fee, would no longer pay in-credit interest. It previously paid 3% on balances of up to £2,500.
While Nationwide said the majority of its accounts would be cut by less than the 0.65% fall in the base rate, its most generous accounts have been slashed by much more than that.
As well as FlexDirect, Nationwide is cutting the interest rate on its Junior Isa and Future Saver from 3% to 1%, its regular saver from 3.5% to 1% and its Help to Buy Isa from 2.5% to 1%.
Its tax-free loyalty single access Isa is being slashed from 1.4% to 0.25%, and Issue 3 of its single access Isa from 2% to 0.25%.
The building society's savings prize draws are unaffected, even if the interest rates on its savings accounts are being slashed.
Nationwide has also taken the decision to pause its Recommend a Friend offer from 6 April. It says that any current account switches made before this date will be honoured, ensuring the member and new member will each receive their £100.
The table below shows you the changes to its existing savings accounts (effective either 1 or 15 May).
Nationwide's FlexDirect account has been very attractive to customers over the years.
The building society has been the largest beneficiary of bank account switching in the past six years, with switch figures compiled by Moneycomms discovering that it has received nearly 550,000 current accounts since 2014, likely due to its 5% AER interest rate offering.
Whether or not this will continue to be the case is uncertain, although, with its new 2% rate, the society still offers a competitive rate compared with its rivals.
Lloyds Bank offers tiered interest with the top-level paying 2% AER on balances between £4,000 and £5,000, but you'll need to pay out two direct debits each month to qualify for the interest.
TSB will , meaning customers will earn £22.02 less a year. Interest is only payable on the first £1,500 in credit on your account, so the maximum you'll be able to earn after a year is £22.38, provided the rate doesn't change any further.
Santander is also from 1.5% AER to 1% AER from 5 May. Although it's a smaller rate, you can save up to £20,000, so is more suitable for larger balances. However, you will need to pay £5 a month to have the account - or £60 a year.
Meanwhile, Starling Bank - a Which? Recommended Provider - will cut it's interest rates from 18 May. Those with up to £2,000 in their account will see the rate cut from 0.5% to 0.05%, while those with between £2,000 and £85,000 will see it cut from 0.25% to 0.05%.
Generally, when the base rate is cut, borrowing becomes cheaper while savers see interest rates on their accounts fall.
UK banks generally tend to follow suit of what the BoE declares, so further current account interest rate cuts could be on the cards.
This means that savers will generally see lower returns on their cash for the foreseeable future. If you don't need access to your cash, you could get a better rate with a fixed-rate savings bond.
These typically come with higher interest rates than an instant access, notice or regular savings accounts, and can extend over a period of one to five years.
Just bear in mind that you may miss out if the base rate recovers and rises again, and you won't be able to access your cash if you need it before the end of the fixed term - although some providers have relaxed these rules to help people during the coronavirus.