Santander 123 rate to be cut to 1.5%

ceredigion wrote: »

Or put a quid in their savings account

I don't actually want to switch, I'm happy where I am. But I was hoping FD were like Nationwide, TSB and Tesco who have current accounts offering interest without too many conditions and certainly not having to switch.

If I could open a FD First account without switching, and a Savings account with a nominal balance - to start their Regular Saver, that would suit me.

Schiff.
open a FD current account.
open a FD savings account. (means no £10.00 monthly fee and no need to deposit or leave £1000.00 in account).
leave say £1.00 in each.
open regular saver ensuring £300.00 is in the FD current account. then £300.00 each month on the same date.
job done.
no more than £2.00 tied up and no fee's.

1kevfp wrote: »

First Direct ref their cuts have stated " when setting our rates we take into consideration a number of factors, including COMPETITOR ACTIVITY !" That smells of collusion to me... looks like premium bonds for me instead of a poxy .90% from F.D- worth the gamble ?

Or competition?:cool:

I received their letter about the change yesterday. It highlights the alternative 123 Lite account which is briefly mentioned in the MSE blog article, which pays the same cashback but no interest for a lower monthly fee of £1.

In effect, Santander are charging an extra fee of £48pa (not tax deductible) in order to earn interest, so the headline interest rate of 1.5%pa is a bit misleading. Even on a full £20,000 balance they are only really paying 1.25% gross, allowing for the £48pa in extra fees compared with the Lite version.

For anyone who pays tax on savings interest, the effective gross rate is even lower because the monthly fee cannot be offset against the interest earned for tax purposes. For someone who pays higher rate tax on marginal savings income, the effective net rate is only 0.654% (=((0.6*298)-48)/20000) which is equivalent to a gross rate of 1.1%.

For balances of less than £20,000 the effective interest rate is even lower. Many customers with less than the full £20,000 savings would be better off with a Lite account and a separate savings account after these changes. Santander will need to handle this very carefully to ensure that customers are treated fairly.

harz99 wrote: »

Not necessarily the best idea to wait - fixed rate bonds are starting to drop as well, see Vanquis have just reduced all theirs, although not by 50%!

just looked at Atom, 2yr @ 2.2%,but never read any reviews on it?
reckon it won't be around long.but, only up to 10k