Posted on: 19th August 2020 8:35pm
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.
Posted on: 9th August 2020 9:28pm
Interest rates awarded to savings account holders are to be further reduced by NatWest later this month. These altered rates are set to come into effect on the on August 18th. This comes after earlier reductions on certain account types back in April. NatWest justified its decision by saying the rates were reduced upon reviewing both its own rates and those of its competitors. This being said, back in March NatWest abstained from cutting rates on savings accounts after the Bank of England not for the first time cut the base rate.
The Savings Builder account introduced by NatWest two years ago in 2018. Initially this account offered a rate of 1.5% on sums worth less than £10,000, and 0.2% on those exceeding this. Although already slashing the 1.5% rate on accounts worth less than £10,000 in April 2020 to a mere 1%, this new round of cuts will reduce the rate again to 0.75%. This puts the rate to be reduced to half of what it stood at in 2018. The same occurring to those with over £10,000 in their account. The rate on accounts holding over £10,000 will see a reduction on interest to 0.01%.
Those with a NatWest Individual Savings Account should also expect to see reductions on their interest rates. Currently the interest rates on NatWest’s cash ISA’s stand at 0.01% on accounts holding up to £49,999, and for those holding more than £50,000 the rate is 0.25%. After the 18th of August the 0.25% rate shall be reduced to just 0.1%. The new rate will mean an individual with £100,000 in their ISA can expect to only expect to earn £100 interest annually.
Premium saver accounts will undergo less reductions to their various rates however they’re not all entirely unaffected in this fresh round of cuts. Although the 0.01% rate on balances between £1 to £24,999, and £25,000 to £49,999 is remaining the same, premium saver accounts with between £50,000 and £1m will have interest reduced from 0.35% to 0.2%. Despite this, accounts exceeding £1m which currently earn 0.01% interest will continue to do so and remain unaltered.
This must come as a shock to many loyal NatWest customers given both the now meagre amount of interest their accounts will earn, as well as the fact this is the second round of interest rate cuts by the bank this year. The question must of course now be what is next for NatWest, will we see further cuts or will they instead eventually rejuvenate them as the economy begins the stabilise post Covid-19? One thing will certainly be clear however, many individuals who have their savings effected by these cuts by NatWest will be far from delighted by this decision.