The major British financial and banking institution Lloyds Banking Group Plc is to reduce interest rates for both those holding current accounts with Lloyds Bank and its subsidiary, the Bank of Scotland. These cuts will be in effect from October 1st. The reductions to interest rates follow a trend of cuts across the market this year due to the Covid-19 pandemic, and its concurrent political and economic effects.
Those holding a Club Lloyds account, or a Vantage account from the Bank of Scotland currently earn 1% annual equivalent rate (AER) interest on balances between £1 and £3,999.99. The AER on these current accounts is to be slashed down to 0.6%. For customers holding accounts with balances of between £4000 and £5000, the interest rate will be decreased from 2% to 1.5% after October 1st. These rate reductions equate to a loss in real terms of around £25 interest annually for the maximum account value.
Lloyds Bank and the Bank of Scotland are cutting down rates to the bare minimum, similar to many of their competitors such as NatWest and HSBC. These drops come after the Bank of England dropped the base rate to as low as 0.65% in a series of successive cuts throughout the year. It is currently unbeknownst as to whether or not the base rate will decrease further, although it is not out of the question as economic depression looms. What is clear however, is that these cuts from both banks certainly won’t afford any admiration from their customers. Something which Lloyds Bank and the Bank of Scotland ought to be seeking to achieve considering they both were ranked relatively low in a recent survey on customer satisfaction for all major banks in the UK. With 40% and 42% of respondents stating they would not recommend the services of Lloyds Bank and the Bank of Scotland respectively.