Santander slashes interest rates by half for 123 savers

Santander has slashed interest rates on its flagship 123 current account by 50 per cent.

The account has long been the subject of an extensive marketing campaign by the Spanish lender with Olympian Jessica Ennis-Hill, golfer Rory McIlroy and F1 star Jenson Button the faces of the product.

Interest rates on deposits have been cut from three per cent to 1.5 per cent in the wake of the Bank of England’s quarter per cent cut two weeks ago.

The reduction, which is six times more than the Bank of England’s own cut, ends one of the best deals available on the high street.

About 500,000 account holders will be affected by the chance to balances of up to £20,000 from November 1.

As well as its competitive rates for savers, the account has been popular due to its feature which provides cash-back on household bills for a £5 per month fee.

The bank said it was forced to make the reduction because the market expects rates to stay “lower for longer” and the banking industry faced higher costs.

Experts have advised that savers should consider investing in stocks and shares rather than keeping their money in the bank.

Calum Bennie, savings expert at Scottish Friendly, said: “With the news that Santander is cutting the rate on its hugely popular 123 account in half, cash savers are once again left wondering who is going to stand up for them.

“Mortgage costs have come down in line with the cut in interest rates by the Bank of England, but savings rates have been cut deeper and even closer to the bone leaving many to consider where they can turn to get a return on their cash.”