Savers have just a few days left to get the best current account deals

Nationwide, TSB and Santander are all slashing the rates on interest-paying current accounts

There is more bad news for savers as banks are cutting the rates on some of their highest-paying current accounts.

Savers have just a few days left to take advantage of Nationwide’s FlexDirect account, which pays 5% interest on balances up to £2,500 for the first year.

Nationwide is cutting the interest rate on this account to 2%, which then drops to 1% after 12 months. If you want to take out this account you will have to make sure you apply before 1 May.

There are no monthly fees, but you have to pay in a minimum of £1,000 a month.

TSB is also cutting the interest rate on its 3% Classic Plus Current Account to 1.5% from 2 May.

It is the second cut to the account in twelve months as the bank reduced the rate from 5% to 3% last July.

Santander is cutting the interest paid on its 123 current account from 1.5% to 1% on balances up to £20,000 from 5 May.

Starling is also cutting the interest rate on its current account from 0.5% on balances up to £2,000 to 0.05% on 18 May.

Rachel Springall, finance expert at Moneyfacts, says: “Time is running out for consumers to secure the top high interest rate available on a current account, with just days left.

“It seems that in a low interest rate environment, the impact of the coronavirus pandemic is having an effect on the current account market now too.”

Best current accounts

Source: Moneyfacts 2020

Why are banks cutting rates?

In recent years, high-interest current accounts have offered a good option to savers who have been hit by generally low savings rates.

But rates on these accounts have been falling for several reasons. One is that banks are now less driven to pay good offers in order to attract savers, as they can borrow money cheaply from the Treasury.

Another is that the Bank of England base rate, which is factored into savings rates, has been low for a long time. In March the Bank cut this rate to a record low of 0.1%.

Is it still worth taking out an interest-paying current account?

Even with the cuts it could still be worth taking out such an account as savings rates are so low across the board.

Springall says: “These cuts will be another blow to savers who are seeing interest rates plummet across the savings market as it will become more difficult to get a competitive return on their cash.

“Current accounts could still be a salvation for savers regardless, as the top high interest current accounts can pay better rates than most of the standard saving account market.”

The best easy access account rates have fallen from highs of 1.6pc to 1.2pc now, with Goldman Sach’s Marcus account the current best buy.

Fixed-term bonds are paying higher rates, but still not as much as Nationwide’s new Flexdirect interest rate of 2%.

Vanquis Bank’s fixed one-year deal pays 1.54% while its three-year bond has an interest rate of 1.79%. Both accounts can be opened online with a deposit of £1,000.

The top-paying fixed year deal is from RCI Bank at 1.90%, but you will have to lock in your money for five years. You can open this account online with a deposit of £1,000.