NatWest has told all savers that interest rates are changing this month(Image: Getty Images)
Natwest customers with savings accounts are being informed of important changes as the high street bank slashes interest rates from 19 January.
The financial institution has been contacting savers via email to announce the reduction, a move that will disappoint those looking to maximise returns on their deposits. In its communication to customers, the bank stated: “We want to let you know we’re changing the interest rate on your account(s). You may have heard the news that the Bank of England has decided to reduce the base rate. We’ve been looking at our rates too, as well as what’s on offer from other savings providers right now, and we’ve decided to reduce some of our interest rates.”
Changes include:Digital Regular Saver Annual Equivalent Rate 5.50% going to 5.25% /Flexible Saver £1 – £24,999 1.06% to 1%Savings Builder £1 – £10,000 1.50% to 1.25%Help to Buy ISA (Tax-free) 1.85% to 1.60%First Saver 1.85% to 1.60%Adapt Account 1.85% to 1.60%
For more information on all the changes click here.
This announcement follows December’s Bank of England decision to lower interest rates to their lowest level in nearly three years, dropping from 4% to 3.75%. The Monetary Policy Committee’s fourth reduction of the year came as Governor Andrew Bailey acknowledged: “We still think rates are on a gradual path downward,” adding, “But with every cut we make, how much further we go becomes a closer call.”
Mr Bailey noted that the UK has “passed the recent peak in inflation and it has continued to fall”, enabling the MPC to reduce borrowing costs, though Budget measures are anticipated to impact inflation moving forward. The shift comes as a savings expert has urged consumers to broaden their horizons beyond traditional high street banks such as NatWest, Barclays, Nationwide and Santander.
Matthew Jenkin from consumer group Which? highlighted how savers can inadvertently fall into costly ‘traps’ by sticking with familiar names. He warned that depositing £10,000 in a high street instant access account could result in losing out on hundreds of pounds in potential interest.
Mr Jenkin explained: “One of the biggest mistakes you can make when looking for the best home for your savings is limiting your search to the high street. The familiarity of a household name may feel safe, but breaking out of your comfort zone and choosing a smaller lesser-known provider could leave you better off.”
He pointed out that smaller online providers frequently offer significantly more competitive rates, with Moneyfacts data revealing the most substantial rate differences appear on instant-access products. For a £10,000 deposit, the variance in interest earned could exceed £300 over a 12-month period.
Mr Jenkin explained: “For example, if you invested £10,000 in a high street account paying 1.15% AER – the average high street rate – you could expect to earn £115 in interest over a year. But if that balance was invested in the top account for larger deposits you’d earn 4.48% AER and your annual interest income would increase to £448. That’s a difference of more than £300. If you’re nervous about saving with a bank or platform you’ve never heard of, there are some checks you can perform to ensure your money is protected.”
He further advised on the importance of verifying whether the bank or platform is covered by the Financial Services Compensation Scheme (FSCS), which safeguards up to £120,000 of a saver’s funds should the institution fail. He added that while challenger banks must adhere to the same rules and regulations as traditional banks, not all are protected under the FSCS.