Santander slashes savings rates amid ongoing 123 speculation

New customers opening a Regular eSaver account or Help to Buy ISA with Santander since yesterday (Tuesday) will receive a lower rate of interest on their savings, though existing customers' rates are not affected.

The bank has blamed "historic low" interest rates in the wider market for its decision to cut the rates. It comes as the Bank of England is due to reveal its decision tomorrow (Thursday) on a possible cut to the base rate, and after reports last week that Santander is considering dropping the headline interest rate on its 123 account to 2%.

A spokesperson for the bank told us "no decision" has been made on cutting the 123 rate, though we understand the bank has put contingency plans in place in case it does decide to do this. For more on whether Santander 123 is still worth it if the rate were to drop to 2%, see Martin's full Santander 12... analysis.

How is the Santander Regular eSaver changing?

Since yesterday, the rate for new customers opening a Regular eSaver account has been reduced from 5% to 3%. You can deposit a maximum of £200 into the account each month, and this must come via a standing order from your Santander current account.

When it offered 5% the Regular eSaver featured in, but didn't top, our best-buy tables – for the latest top picks see our Regular Savings Accounts guide.

If you're an existing Santander Regular eSaver customer, there's no need to worry – your rate won't change.

How is the Santander Help to Buy ISA changing?

The interest on Santander's Help to Buy ISA has also dropped, again for new customers applying since yesterday.

This ISA actually pays two different rates:

• If you're a 123 World or Select customer, the rate you can get has dropped from 2.5% to 2%.

• Otherwise, the rate you can get has dropped from 2% to 1.5%.

For more options and our latest top picks, see our Help to Buy ISAs guide.

Again though, if you already have a Santander Help to Buy ISA, your rate WON'T change.

What does Santander say?

A spokesperson told us: "Interest rates remain at a historic low and to reflect these market conditions we are reducing the rates on some of our savings products for new customers.

"Existing customers with these accounts will be unaffected and we continue to offer a range of competitive savings accounts with in-branch and online access.

"If we were to make a change to any of our banking products, including the 123 current account, we would write to customers providing them with 60 days' notice." 

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