Santander announced earlier today that it is raising the in-credit interest rate on its 1I2I3, Select and Private Current Accounts. Following this rate hike, a monthly interest rate of two percent AER/1.98 percent gross (variable) will be paid on balances up to £20,000. With this new 2.0 percent rate, customers can get up to £396.38 in interest on their account each year, based on a continuous balance of £20,000.
Customers will find this interest rate automatically applied to their current accounts from today (February 7, 2023).
Furthermore, account holders will be able to receive up to £396.38 in interest on their account each year.
This will be paid in addition to any cashback earned on selected household bills paid by direct debit.
As it stands, Santander is still the only bank to allow customers to earn cashback on household bills and interest on in-credit balances through a current account.
This comes shortly after the Bank of England’s decision to raise the base rate again last week.
Last week, the central bank’s Monetary Policy Committee (MPC) made the decision to hike the rate to four percent, representing the tenth time it has done so in the past year.
As a result, banks such as Santander have responded by hiking interest rates across its range of savings products.
The UK’s soaring inflation rate has been diminishing returns on accounts for the past year to the detriment to savers.
Outside of its current accounts, Santander also confirmed a wave of interest rises across its savings accounts with all products linked to the base rate getting a 0.50 percent boost.
Among the affected products are the bank’s Rate for Life and Good for Life savings accounts, and the interest rate rise will be implemented on March 2, 2023.
As well as this, Santander is raising rates on products that are not linked to the Bank of England’s base rate from February 21, 2023, notably on savings accounts which are paying between 0.55 percent to 0.60 percent.
These include the bank’s Everyday Saver, Instant Saver, ISA Saver and the Easy ISA accounts.
Despite Santander offering this rate boost, other banks and building societies appear to be taking their time in passing on the base rate hike.
Experts are warning that savers may not “see any large increase overnight” despite the recent interventions from the Bank of England.
Lucinda O’Brien, a personal finance expert at money.co.uk, outlined the state of savings interest rates in the UK.
She explained: “The Bank of England base rate stands today at four percent. In January 2022, the base rate was only 0.25 percent and the Bank of England forecast is that rates could rise to 5.2 percent by the end of 2023.
“Despite increasing interest rates creating challenges for those who owe money, savers can benefit massively from this increase.
“However, many high street easy-access savings accounts may not pass on the interest rate rise, meaning you’d be unlikely to see any large increase in interest overnight.”
On what people can do to make the most of the rises to interest rates, she added: “To feel the maximum benefit of the hike, you should move your money to a higher-interest fixed-rate savings account and keep it there.
“Any savers who don’t move their money to the highest interest rate savings account will be missing out.”