Did you spot smoke and mirrors trick that Santander pulled last week? SYLVIA MORRIS explains

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We got a nasty shock last week when Santander announced a massive 20 per cent cut to one of its top savings rates.

The bank, which has more than 14 million customers, said it was acting proactively as it expected the Bank of England’s base rate to fall in the coming months. 

A few days after the shock cut announcement, it hiked its mortgage rates. Let’s hope others do not follow and cut their savings rates, especially given that the base rate has yet to fall from its current level of 5.25 per cent.

I fear all the good progress made by the powerful Treasury committee last year, when it pressured big banks to start rewarding savers with slightly higher interest rates, could very quickly be wiped out.

This morning, that same committee will again grill the bosses of Barclays, Lloyds, NatWest and Santander over whether they are giving customers a fair deal.

Sleight of hand: Santander, which has more than 14m customers, said it was acting proactively as it slashed one of its top savings rates by a massive 20%

But don’t expect much to improve on these standard easy-access accounts. Banks have shifted them slightly since after their first grilling, but they still pay as little as 1.2 per cent.

Santander’s surprise rate cut last week should serve as a sharp reminder that we need to keep a close eye on the rate we earn on our savings.

There are plenty of us who don’t, recent research from Shawbrook shows. Thumbing through the big banks’ recently published report and accounts for last year is a worrying reminder of just how important this is. 

Lloyds, NatWest, Santander, Barclays and HSBC made billions of extra pounds from our complacent tendencies last year. Bankers enjoyed record profits, which they have largely withheld from savers.

They increase their net interest margins — the difference between the amount they pay savers and charge borrowers — and gave their savers in their standard easy-access accounts as little extra as possible.

The Bank of England’s monetary policy committee meets tomorrow to vote on its base rate. 

Economists have told me they expect interest rates to remain at 5.25 per cent and that cuts will come later. 

Base rate is expected to come down gradually and hit 4.2 per cent by the end of the year.

But that hasn’t stopped Santander from cutting its Easy Access Saver Limited Edition 3 prematurely. 

It is a massive cut from 5.2 per cent to 4.2 per cent from mid-May. The bank launched the account in September 2023 in a ‘snatch and run’ ruse.

Trusted number-crunchers told me the bank took in billions of pounds when the account was on sale for just eight days, putting the bank at the top of the best buy tables. 

The bank says the recent reduction is due to the current market conditions.

Santander’s move is in marked contrast to how slowly the big banks reacted when base rate started to climb just over three years ago. It took them four months to pass on any of the increase to savers.

High Street banks have raised their deals on fixed-rate bonds — but are still way behind newer banks, where a host pay more than 5 per cent for one year.

Barclays is the best of a bad bunch at 4.65 per cent, while Santander pays just 4.1 per cent and Halifax 4.15 per cent. 

They also give better headline rates on some of their variable rate accounts.

But they typically only pay these for a year. For example, the Santander Easy Access Saver Limited Edition 3 headline rate drops to just 1.2 per cent after 12 months when your money is moved out of the account into its Everyday Saver.

Halifax Bonus Saver pays 4.1 per cent but only for a year, and to those who make three or fewer withdrawal during that time. 

After 12 months you find yourself in its Instant Saver with a lousy rate of between 1.45 per cent and 1.8 per cent.

These ‘go-to’ rates look particularly pathetic when compared with their rivals which pay over 5 per cent, with the top rate of 5.08 per cent from Charter Savings Bank. 

The average rate, says data scrutineers Moneyfacts, is 3.18 per cent.

Easy-access cash Isa rates from the big banks are just as bad. One of the worst is 1.16 per cent from Barclays. 

The Santander Isa Saver at 1.2 per cent and Lloyds Bank at 1.4 per cent are also terrible when you can earn more than 5 per cent with other providers such as Chip (5.1 per cent), Zopa (5.08 per cent), Charter Savings Bank (5.03 per cent), and Harpenden Building Society and Kent Reliance, both at 5.01 per cent. The average rate is 3.32 per cent.

Sy.morris@dailymail.co.uk