Santander has boosted the interest rate on its easy-access savings to 7 per cent, propelling it far and above the best-paying accounts in the market.
Yesterday, the bank increased the amount it pays on its Easy Access Edge Saver account by 3 percentage points — from 4 per cent previously.
However, the catch is it’s only the first £4,000 on the account that returns the top rate. You can earn £22.60 in interest every month — amounting to £271 over a year.
This includes an underlying rate of 4.5 per cent and a 2.5 per cent bonus rate for the first 12 months after opening the account.
Banks have been notoriously slow to increase the interest they pay on easy-access bank accounts, while making the most of recent Bank of England’s base rate increases to jack up the mortgage rates they charge homeowners.
Santander has increased the amount it pays on its Easy Access Edge Saver account by 3 percentage points — from 4% previously
The next best rates currently on the market are offered by smaller, challenger banks: Tandem on its Instant Access Saver account at 5 per cent, followed by Cynergy Bank at 4.8 per cent.
They have typically been quicker to increase their rates in a bid to attract savvy savers.
However, at 2 percentage points clear of the nearest competitor, Santander’s new 7 per cent rate is a standout.
So what else do you need to know before signing up?
Firstly, only those with a Santander Edge current account — which costs £3 a month to run — can open the Edge Saver account.
Sarah Coles, of stockbroker Hargreaves Lansdown, says: ‘This rate does put them at the front of the market, but it’s a way of locking new customers into the bank’s other accounts that are linked to this savings one, too.’
Existing Santander customers can upgrade to an Edge account but should check that their current benefits (including casback percentages on utility payments through their account) match or are better than the new offer before switching.
Santander launched the Edge account in November last year with the linked savings account.
Ms Coles says the rate hike comes amid a wider push to promote this new account as Santander has made significant changes to its range recently.
In June, Santander withdrew its 123 current accounts from sale. At its launch in 2012, the 123 account became one of the most popular current accounts, having for years paid 3 per cent interest rate on balances up to £20,000, plus cashback on bills.
For this new Easy Access Edge account, any balances over £4,000 do not earn any interest at all, so those with larger savings pots would need another savings account for the surplus.
In comparison, those saving in the Tandem savings account can earn 5 per cent on up to £250,000 while Cynergy Bank pays 4.8 per cent on balances of up to £1 million.
A nother important catch is that you will only receive the extra 2.5 per cent bonus rate for the first 12 months after you opened the account.
After that, your rate will drop back down to 4.5 per cent — which is more in line with other High Street banks.
Similarly, the interest rate paid by Tandem Bank falls to 4.65 per cent after one year, when the 0.35 per cent sign-up bonus falls away.
Existing Santander customers who have already opened an Edge Saver in the past year will also benefit from the 2.5 per cent bonus rate for 12 months starting yesterday.
Ms Coles says the high rate on offer is designed to act as a lure to new customers and bring business to the bank’s easy-access accounts.
