M&S Bank Slashes Rate on Its Regular Savings Account
M&S Bank has joined its sister banks in cutting the rates on its regular savings accounts, from 5% AER to 2.75% AER.
In October, HSBC and First Direct slashed rates on their regular savings accounts to 2.75%, leaving M&S Bank, as the only bank offering 5% interest for diligent, monthly savers. At the time, it was speculated that M&S Bank, which is partly owned by HSBC, might follow suit. They’ve done so, as of last Friday.
Existing customers will continue to receive 5% interest until their 12-month term is up, but new account holders will earn interest at the lower rate of 2.75% AER.
To open an M&S Bank’s Monthly Saver account, you need to have switched to M&S’s current account, using the switch service, and have two active direct debits. You can deposit between £25 and £250 each month into the account, for 12 months—or add more in later months if you don’t reach the maximum deposit of £3,000. But you can’t withdraw those funds for 12 months.
That money and interest earned is then deposited as a lump sum back into your M&S current account or easy-access savings account at the end of the year.
The highest interest rate you can now earn on a regular savings account is 3%, with branch-only offers from several local banks—but you’ll need to live nearby and, typically, visit a branch to open one.
Saffron Building Society offers 3% for 12 months, with deposits of between £10 and £250 each month and branches in Essex, Hertfordshire and Suffolk.
Kent Reliance offers the same rate, with deposits between £25 and £500 a month, but the account must be opened at one of the bank’s nine branches, located in Kent, West Sussex and Hampshire.
Monmouthshire Building Society also pays 3% AER on deposits between £20 and £300 a month and has branches across South Wales and two locations in North Somerset.
Regular savings accounts were once very attractive to conscientious savers, who were rewarded by banks for their regular deposits and restrictions on withdrawals with higher interest rates than they could earn on easy access savings accounts.
But with banks cutting rates on regular savers, the attractiveness—and the future—of this type of account are in doubt.
Overall, banks are cutting the rates they pay on savings, as they compensate for lowered interest rates on lending, especially in the competitive mortgage market.
“The banks have little appetite for customer savings at the moment,” Andrew Hagger, personal finance expert at Moneycomms, explained.
“The whole savings market is seeing rates drift lower and unfortunately regular savers are part of the current cull.”