Savers were dealt a hammer-blow on Tuesday after Santander (SAN) said it will slash the interest rate on its 123 account to just 1%.
To make matters worse, the rate on the hugely popular account will then be lowered to 0.6% in August. Until Monday 4 May, Santander's 123 account paid 1.5% interest and offered 1 to 3% cashback on household bills.
Following the changes, customers will be able to earn a maximum of £119.603 ($148.92) in interest per year on their in-credit balance. The monthly account fee will remain at £5.
Martin Lewis, founder of MoneySavingExpert.com, labelled the account a “dead duck,” adding that people should switch to better payers.
He said: “This is all rather a shame. When the 123 account launched in 2012, it was a true game changer, with cracking interest up to 3% for savers, and a cashback offer to match.
“It stayed a table topper for about five years, yet since then the account has suffered death by a thousand rate cuts. Now, it's just another has been account.”
Santander said the change is being made as a result of the recent reduction in the Bank of England Base Rate, which now stands at 0.1%.
Santander also said the move takes account of the ongoing financial impact of regulatory changes in the banking industry.
The announcement comes a week after the UK arm of the Spanish bank reported a 58% fall in pre-tax profits to £114m in the first three months of this year, largely due to the bank setting aside £122m to cover potential bad loans related to the coronavirus crisis.
The bank also announced 206,000 mortgage customers, a fifth of its loan book, were on payment holidays, along with 33,600 unsecured borrowers, meaning it has less money coming in over the next few months.