UPDATED: Santander 123 to slash interest to 1.5% – should you ditch it?

MSE_Eesha

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

UPDATE: 14 August, 11.28pm. We've learned Santander will cut the headline rate on its 123 current account from 3% to 1.5% from November, so Martin's written a full 'should you ditch it?' analysis.

Read Martin's "Santander 123 to slash interest to 1.5% – should you ditch it?" Blog.

This was his original blog in July:

Read Martin's "If Santander 123 drops interest to 2% is it still worth it?" Blog.

Please click 'post reply' to discuss below.

Alter_ego

Just read the blog. How do you arrive at Santander 123 £20000 at 3% earning £397 before £60 fee?

anythingbutordinary

It's £396 on £20,000 at 2% (the lower rate - really 1.98% APR) before you deduct the £60 fee.

Alter_ego

anythingbutordinary wrote: »

It's £396 on £20,000 at 2% (the lower rate - really 1.98% APR) before you deduct the £60 fee.

If so why say 3%? (in the table)

Edit - table has been amended now

Nick_C

As I get almost £13 a month cashback (over £7 from my mortgage payments), they could cut the interest rate to zero and it would still be a good deal for me.

What I need to consider is whether I would be better off moving my savings somewhere else and switching to the new Lite account. But for an instant access account, 2% would still be an exceptionally good rate of interest.

Alter_ego

Nick_C wrote: »

2% would still be an exceptionally good rate of interest.

How about 2% minus £5 monthly fee?

Nick_C

Alter_ego wrote: »

How about 2% minus £5 monthly fee?

But in my case the £5 monthly fee is more than covered by the £13 cash back

robin58

Doesn't surprise me as the rate was always sold as being variable.

What I don't like is the Bank of England dumping low rate bonds/loans onto the banks who then squirrel this money away without loaning it out , whilst turning their backs on the public.

One day they will need us to put money back into our saving accounts.

Will they like the two fingers they will get?

spikyone

I can see Santander losing themselves a few customers from this.

If the rate drops to 2% it will be slightly below my mortgage rate - so I'd overpay that instead of using the 123 for a chunk of "savings", with the caveat that I'd keep my higher-paying accounts brimmed. At that point it would make more sense for me to switch to the Natwest current account that pays cashback on bills, as it's a flat 3%, which will beat Santander's rates even taking into account the 123 Lite's lower fee.

Nick_C

spikyone wrote: »

At that point it would make more sense for me to switch to the Natwest current account that pays cashback on bills, as it's a flat 3%

I'm assuming your mortgage isn't with Santander or the repayments are very low?

I'm getting over £7 a month cashback on my Santander mortgage payments. It's worth keeping the account open for that alone.

malc_b

I think the table in the article is a bit simple. It assumes your options are one santander 123 or one lloyds club. For couples you can have 3 account (1 each plus 1 joint) so 5k, 10k, 15k, are all better returns with lloyds. And what about tesco current accounts? Again you can multiple accounts, 2 each, so a couple have have 12k (4 x 3k) in those earning 3% with no requirement for DD or paying in regular sums.

I think it comes down to a fairly simple question - is cashback >= £5 pm. If so then keep the account for that, stash any cash you can't get better than 2% for. If cashback < £5 then look elsewhere first (maybe switch to lite) but it depends on how much cash you need a home for.