‘Competitive’ Current Account Market Could See Further Changes After Rate Rise

Banks and building societies could tweak their current account offerings following the base rate rise, experts have suggested.

In recent years, people have turned to current accounts for better returns on their cash, rather than traditional savings accounts as interest rates have dwindled.

But in 2016, a wave of banks announced cuts to their current account offerings following the drop in the base rate from 0.5% to 0.25%.

In August 2016, Santander announced it was halving a 3% interest rate offered on its 123 current account. From November 1 2016, the account has paid a rate of 1.5% on balances up to £20,000.

Other current account providers followed suit with announcements of rate cuts or reduced perks.

In early 2017, Lloyds Bank cut its Club Lloyds credit interest rate from 4% to 2%, TSB reduced a 5% rate on its Classic Plus account to 3% and Halifax dropped its £5 monthly reward payment on its Reward current account to £3.

Sally Francis, a money expert at MoneySuperMarket, said the current account market remains “pretty competitive at the moment”, with providers offering big cash amounts to switch.

If rates in the savings market now see an improvement following the base rate rise, this could also have a positive impact on the current account market, she said.

With many current accounts offering better returns than traditional savings accounts: “It will be interesting to see whether (banks) keep with that pattern (if savings rates go up) or whether they go back to the traditional route,” she said.