Nationwide Building Society is providing clarity for savers and current account members as it makes changes to its rates following the Bank of England’s decision to reduce Bank Rate to just 0.10% - the lowest rate on record.
The majority of accounts will see less than a 0.65 per cent reduction. However, 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, despite wider rate reductions seen across the market, the Society now needs to reduce some rates by more than 0.65 per cent to offset a lower reduction on other accounts.
Despite Nationwide being one of the first major savings providers to respond to the Bank Rate reduction, the Society expects to continue paying more than the market average once the rest of the industry announces its changes. The Society remains committed to offering a competitive alternative to the high street banks.
In terms of the Society’s on-sale accounts, Triple Access Online Saver and ISA will continue to offer a competitive rate of 1.00%. Similarly, the rate on the Start to Save account will also be maintained at 1.00% and continues to offer four prize draws offering members a chance to win £100 if they save regularly. In addition, the Society’s ISA prize draw is not impacted by these changes. Nationwide’s current one, two and three-year fixed rate accounts also remain the same offering rates of between 0.50% and 0.75% AER. However, Nationwide is launching new issues1 with reduced rates on other on-sale accounts as well as withdrawing its Triple Access Saver and ISA from sale.
While around two thirds of the Society’s savings accounts will be reduced by less than 0.65 per cent, some savers in higher-paying accounts will see rates reduced by more. These are typically accounts, such as Help to Buy ISA and Loyalty Single Access ISA, that the Society has attempted to shield from the wider rate reductions seen across the savings market over recent years.
Accounts impacted by this change include the Triple Access Saver / ISA, which will reduce to 0.10% from its current 0.75%, while the Society’s Loyalty Saver (currently paying 1.10% for those who have been members for 15 or more years) and Loyalty Single Access ISA (currently 1.40%), will reduce to 0.25%.
These changes ensure that the value of each of the products across the Society’s entire range remains fair to all members.
Rate changes for existing savers will be effective from either 1 or 15 May (depending on product). The Society will be writing3 to members in advance to notify them of the new interest rates.
Savers can also sign up to Nationwide’s SavingsWatch service, which highlights any new products the Society launches that may benefit them as well as notifying them of interest rate changes that impact them.
Last year, Nationwide’s higher savings rates paid on average around 50 per cent more than the market average. This equated to over £500 million of member financial benefit and the Society is committed to continually delivering value to members. While this gap is likely to decrease and with Nationwide being the first major savings provider to respond to the Bank Rate reduction, the Society expects to continue paying more than the market average once the rest of the industry announces its changes.
A full list of the products and rate changes can be found below in Notes to Editors.
As a result of the historic low interest rate environment and to ensure the Society continues to support its entire membership, Nationwide’s FlexDirect account will pay, from 1 May 2020, credit interest of 2% AER (1.98% gross) on balances of up to £1,500 for the first 12 months. After that period, the rate will revert to 0.25% AER (0.24% gross) on balances up to £1,500.
This is the first reduction to the credit interest rate on FlexDirect since the account was launched in November 2012. Despite this change, FlexDirect continues to offer one of the highest rates of credit interest on the market.
Any FlexDirect accounts applied for prior to 1 May will continue to receive credit interest of 5% AER (4.89% gross) on balances of up to £2,500 for the remainder of their 12-month introductory period. Any existing FlexDirect members outside the introductory period will have their credit interest rate reduced to 0.25% AER, on balances of up to £1,500, from 1 July (from 1% AER).
Nationwide’s FlexStudent and FlexGraduate accounts will no longer offer credit interest from 1 July 2020, while the credit interest on the Society’s FlexOne will be reduced to 0.10%. These changes affect both existing account holders as well anyone opening these accounts from that date.
The Society will be writing to all impacted current account holders notifying them of the change in credit interest rate.
As a result of the focus the Society currently has on supporting existing members impacted by coronavirus, Nationwide has taken the decision to pause its Recommend a Friend offer from today (Monday 6 April). Any current account switches made before this date will be honoured ensuring the member and new member will each receive their £100.
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%. 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.”