Why has interest rate omn LloydsTSB Esavings account dropped so much?

UKSBD

I opened a LloydsTSB eSavings account in April this year which pays 2.5% (with bonus)

Just checked on their site and if opening the same account now it only pays 1.5%

Looking at the previous rates page - http://www.lloydstsb.com/rates_and_charges/savings/esavings_account_previous.asp
I see it dropped 0.5% if opened between 29th September and 19th November and has dropped the other 0.5% since then.

Why has there been such a big drop, or was I just lucky that I opened mine at the right time?

Gromitt

Because they have been given loads of cheap cash they don't want yours, so by reducing the interest rate, less people will give them cash, then a few months later they find they are at the top of the best buy tables again, so need to reduce the interest rate further to ensure they are not.

After all, if you can get cash at 0.25% or so, why would you want to pay someone 2.5% for the same stuff?

rb10

UKSBD wrote: »

Why has there been such a big drop, or was I just lucky that I opened mine at the right time?

You did get in at the right time!

There has been a drop in savings rates across the board in recent weeks and months. It's mainly due to the Funding for Lending scheme - if banks can access money from the BoE at 0.25% then why would they want to pay you 3%?

As soon as some banks start dropping, others need to do the same. Otherwise they'll end up with more savings than they can lend out.

Another reason is that inter-bank rates have dropped, because of expectations of a further base rate cut.