Lloyds bucks trend with 6.25% savings rate amid cuts

3 godzin temu
Lloyds Bank logo prominently displayed on branch signage (Illustrative image) (Photo by Nathan Stirk/Getty Images) Getty Images

Lloyds Bank is bucking the market trend with a competitive 6.25% interest rate on its regular savings account, standing out as over 20 providers slash rates following the Bank of England's base rate reduction to 4%. The high street bank's offering provides a strong alternative for savers as the average savings rate has tumbled to 3.48%.

The account comes with specific requirements that savers must meet. Customers need a Club Lloyds current account and must make monthly deposits between £25 and £400 through a standing order for the 12-month term.

Crucially, customers who have opened a Club Lloyds Monthly Saver account within the past 12 months cannot open another until their existing account expires. This eligibility restriction affects those looking to open multiple accounts or restart after recent closures.

Account mechanics and potential

Unlike most regular savings accounts, there's no limit on withdrawals, but the monthly deposit restriction still applies. If you withdraw money in a month, you cannot top up your deposit to reach the £400 maximum that same month.

Savers who deposit the maximum £400 monthly without withdrawals will accumulate £4,800 by year's end plus £150 in interest. The 6.25% rate remains locked throughout the complete 12-month period.

Market alternatives and context

For those without a Club Lloyds current account, Principality Building Society offers the market's leading rate of 7.5% on its six-month regular savings account. This allows monthly deposits up to £200, potentially yielding £1,227.53 including £27.53 interest, though withdrawals aren't permitted until maturity.

The broader savings market has seen significant disruption following the base rate cut. Major high street banks like Barclays, HSBC, NatWest and Santander are notably absent from best-buy tables, with only Nationwide maintaining competitive rates alongside smaller providers.

Expert outlook and inflation threat

With inflation forecast to climb to 4% this year, many savers risk seeing their funds eroded over time despite earning interest. The speed of rate cuts has surprised market observers.

Rachel Springall from Moneyfactscompare.co.uk said: "Savers will feel frustrated to see an abundance of providers cut rates since the Bank of England Base Rate cut. As more than a dozen brands cut by the end of last week, it's only got worse, as over 20 providers have now cut since last Thursday, showing how quickly cuts are passed on to hard-pressed savers. It is essential consumers stay in tune with market movements and switch to ensure they are not getting a raw deal. In the coming weeks more savings providers will need to decide whether to pass on the 0.25% cut, but as we have seen over the last few days, sometimes they can cut by bigger or smaller margins."

Sources used: "PA Media", "mirror", "Birminghammail", "Moneyfactscompare.co.uk" Note: This article has been edited with the help of Artificial Intelligence.

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