Getting the best interest rates on savings will be something many people will look to do, but unfortunately for savers, the options are often – at the moment in time – limited. With the Bank of England cutting the Bank Rate twice within three weeks as emergency measures during the coronavirus (COVID-19) crisis, the picture has become even bleaker for those wanting to make their savings work for them by storing it in an account.
Last month, the base rate was slashed by the Bank of England from 0.75 to 0.25, before a further cut to 0.1.
The latter reduction saw the Bank Rate drop to a record low – and while it may have been good news for those on tracker mortgages and some on variable rate mortgages, the outlook hasn’t been as positive for savers.
Earlier this week, Nationwide announced changes to its savings and current account rates following the successive rates cuts.
Among the accounts affected is the building society’s FlexDirect interest rate, which will be reduced to two percent as a direct result of ultra-low interest rates.
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FlexDirect was launched in November 2012, and this will be the first reduction to the credit interest rate on the account.
Currently, Nationwide’s online FlexDirect account pays 5 percent AER interest fixed for the first 12 months, on savings in the account up to £2,500 – 4.89 percent gross a year.
“After that, you’ll get one percent AER/gross a year (variable),” the building society states.
“All you need to do is pay in £1,000 a month, not counting transfers from other Nationwide accounts or Visa credits.”
However, from May 1, 2020, Nationwide’s FlexDirect account will pay credit interest of two percent AER (1.98 percent gross) on balances of up to £1,500 for the first 12 months.
Following this year-long period, the rate will then revert to 0.25 percent AER (0.24 percent gross) on balances up to £1,500.
Despite the change to the account, Nationwide has said FlexDirect continues to offer one of the highest rates of credit interest on the market.
With April well underway, some people may wonder whether there is chance for them to benefit from the five percent rate ahead of the changes.
Nationwide has confirmed that any FlexDirect accounts which are applied for prior to May 1 will continue to receive credit interest of five percent AER (4.89 percent gross) on balances of up to £2,500 for the remainder of their 12-month introductory period.
This means that new customers could apply for the online account ahead of this cut-off date.
But, with May 1 now being exactly three weeks away, the deadline for applying for this account at the current offer is looming.
So, what will the changes mean for savers who already have a FlexDirect account?
Nationwide explains that “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)”.
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.”