Coronavirus has hit the UK, with the epidemic not only having a devastating impact on many people’s health, but affecting millions financially too. Last month, the Bank of England slashed the base rate for the second time in two weeks, with the decision being an emergency response to the coronavirus pandemic.
The BoE’s move saw it reduce from 0.75 percent to 0.25 percent, followed by a later cut to 0.1 percent.
The latter decision took the base rate to its lowest-ever level.
And, while some mortgages – such as tracker mortgages and some variable rate mortgages – could get cheaper following the measure, the cut has dealt a blow to savers.
This month, some banks and building societies have announced changes to savings and current accounts, following the successive interest rate cuts.
This includes Nationwide, but the building society has today said the majority of its savings accounts will see rates reduced by less than the 0.65 percent Bank Rate cut.
However, it said that after protecting the rate on FlexDirect since its launch in 2012 and shielding some of its popular savings accounts, such as Help to Buy ISA and Loyalty Single Access, the Society now needs to reduce some rates by more than 0.65 per cent to offset a lower reduction on other accounts.
The FlexDirect interest rate will also be reduced to two percent on balances of up to £1,500 for the first 12 months from May 1 2020, which the building society said was as a “direct result of ultra-low interest rates”.
After that period, the rate will revert to 0.25 percent AER (0.24 percent gross) on balances up to £1,500.
Nationwide said that any FlexDirect accounts applied for prior to May 1 will continue to receive credit interest of 5 percent AER (4.89 percent gross) on balances of up to £2,500 for the remainder of their 12-month introductory period.
As such, there is still time for new customers to bag the offer ahead of the changes.
This means that existing FlexDirect holders within the 12-month initial period can still receive a five percent introductory rate, however any existing FlexDirect members outside the introductory period will have their credit interest rate reduced to 0.25 percent AER, on balances of up to £1,500, from July 1 (from one percent AER).
The financial institution also confirmed that its Start to Save account will remain unchanged, in a bid to encourage those with no savings to start the habit of doing so.
Furthermore, the Triple Access Online Saver and ISA will continue to offer a rate of 1.00 percent.
However, accounts impacted by the change include the Triple Access Saver / ISA, which will reduce to 0.10 percent from its current 0.75 percent, and the Society’s Loyalty Saver (currently paying 1.10 percent for those who have been members for 15 or more years) and Loyalty Single Access ISA (currently 1.40 percent), will reduce to 0.25 percent.
Rate changes for existing savers will take effect from either May 1 or May 15, with the date depending on the product.
Nationwide has said it will be writing to members in advance to notify them of the new interest rates.
Sara Bennison, who oversees Nationwide’s products and propositions, said: “We know that this is a tough time for savers, particularly after two cuts in Bank Rate in quick succession taking it to an historic low of only 0.10 percent.
“In order to preserve the long-term sustainability of the Society for all our 16 million members, we have had to take these decisions on the interest rates we can offer on a number of our accounts.
“We have tried to remain as competitively priced as possible, with our FlexDirect account, for example, remaining one of the best in the market for credit interest and our savings prize draws helping people into good savings habits.”
Elsewhere this week, HSBC customers have also been told that the bank will be reducing the interest rates on some of its saving accounts, “as a result of the Bank of England’s decision to reduce the Base Rate from 0.75 percent to 0.10 percent.
The rate changes for cash ISAS will be effective from May 1, 2020, while others will come into effect from June 17, 2020.