HSBC and First Direct cut regular savings rates to 1%
HSBC and First Direct have cut the interest paid on their regular savings accounts from 2.75% to 1% for new customers, just days after MoneySavingExpert.com warned a rate reduction was on the cards.
The regular savers, which are only available to those who already have current accounts with the banks, were among our top picks for those saving a set amount each month for a year. But they will no longer feature in our best-buy tables at the new rate – see below for more on the current top accounts.
MSE warned last week that the rates were likely to drop to 1% today (Tuesday 24 November) after we saw emails sent to HSBC customers in error listing the lower rate. HSBC and First Direct are sister banks, as is M&S Bank, which had also withdrawn its own regular saver to new users earlier this month.
Existing First Direct and HSBC regular saver customers are unaffected though, as their 2.75% rate is locked in for 12 months from opening the account. You can't make penalty-free withdrawals from these accounts (you'll lose almost all your interest if you do so), but remember when your account term ends, as at this point your cash will be transferred into an easy-access account with a lower rate.
The news comes on a bad day for savers as NS&I is also today slashing rates on certain accounts for new and existing customers. Those with variable rate savings accounts, such as Income Bonds, will see rates drop straightaway, while those with a fixed rate account, such as Guaranteed Income Bonds, will keep their rate until the end of the term.
What are the top regular savings rates now?
The sister banks offer 3.04% variable interest on their regular savings accounts, though you can only save a maximum of £50 a month, compared with £25 to £250 a month at HSBC and £25 to £300 at First Direct.
Both accounts have a variable interest rate, which means returns aren't certain – though they allow unlimited withdrawals, so you can move your cash penalty-free if the rate drops. You'll also need to have or open a NatWest or RBS current account to access the linked savings accounts.
If you don't have one of these current accounts and don't want one, there are open-to-all regular savings accounts that still beat HSBC and First Direct's new 1% rate.
Coventry Building Society, for example, pays 1.55% variable interest, and you can save up to £500 a month. It also allows early withdrawals, though be aware there's a 30-day interest penalty, and again, the rate's variable, so it's worth keeping an eye on it in case it drops.
See our Regular Savings Accounts guide for full info on the options available. If you want to save more each month, you could earn up to 0.7% interest in an easy-access account or up to 0.92% if you're willing to lock your money away for a year. Find full info in our Top Savings Accounts guide.
What do the banks say?
An HSBC UK and First Direct spokesperson said: "The impact of being in a low interest rate environment is well known. But there are a number of different factors that influence the interest rates of savings accounts and each provider will have their own reasons for the products they offer and the associated interest rates."