Savers’ revolt hits Santander after rates are slashed in half
THE number of savers switching to Santander’s 123 account tumbled after the bank slashed interest rates.
The lender said only 483,000 customers switched to its account in 2016 compared to around one million the year before. The slump came after Santander revealed it was cutting the top rate it paid to savers on up to £20,000 from 3pc to 1.5pc from November.
The move was met with protest from savers who saw the 123 account as one of the few opportunities to get a decent return.
None of the ten major banks in the UK now offer savings rates above inflation, which is 1.6pc.
Savers have lost out since the Bank of England cut interest rates to a record low of 0.5pc in 2009. They were dealt a further blow last August when the Bank cut rates again – to 0.25pc.
Experts said despairing customers are simply sticking to their existing accounts because they are unlikely to get a significantly better deal elsewhere.
Santander chief executive Nathan Bostock admitted that there was a sharp fall in switching to the 123 account but maintained that the 123 account was still a market standout, saying: ‘You have 1.5pc for up to £20,000 and nobody else gets remotely close to those sorts of numbers.’
Justin Modray, founder of Candid Financial Advice, said the fall in new customers was proof Santander’s 123 account was simply ‘too good to be true’ before the cut – and that it is now less attractive to savers.
About 3.8m customers are signed up to Santander’s 123 current account. It posted profits of £2bn for 2016, up from £1.8bn the previous year but the weak pound knocked profits from its UK operation, leaving British earnings 14.7pc lower last year.
The bank set aside another £114m for the mis-selling of payment protection insurance.
Net mortgage lending – gross lending less redemptions – dropped to £1.5bn in 2016 from £2.7bn in 2015.
Santander, which has 14m customers and more than 800 branches in the UK, added that it is braced for a slowdown in the UK economy this year.