A MAJOR online bank with millions of customers will make a huge change in just two weeks.
Monzo Bank has slashed the interest rates on one of its savings accounts.
1
It comes after rate-setters on the BoE’s Monetary Policy Committee last week cut the base rate from 4.5% to 4.25%.
This was the fourth interest rate cut since 2020.
The base rate is used by lenders to determine the interest rates offered to customers on savings and borrowing costs.
A base rate cut can mean that mortgage rates are lowered, which is good news for homeowners.
But savers can be left with the short end of the stick as the interest rate they earn on their savings can also drop.
As the base rate falls, some savings providers, including Monzo, have chosen to lower the interest rates on some savings accounts.
Monzo said it would lower the intertest on its Personal Instant Access Savings Pots from from 3.50% AER to 3.25% AER.
AER, or Annual Equivalent Rate, is used to show you what you could earn from a savings account over a year.
A lower AER means you will have less money in your savings account over a year because it indicates a lower rate of interest being paid on your savings.
Monzo, which only operates online, said it would make the changes automatically on May 27 2025.
It told customers to check its app and look for other types of Savings Pots they have available.
Customers could move their money elsewhere at any time.
Monzo Personal Instant Access Savings Pots are a way to save money while still being able to withdraw it whenever you need it.
They’re used by customers as a flexible option for saving towards short-term goals, like building an emergency fund or saving for a holiday.
OTHER BANK CHANGES
Elsewhere, Barclays, Nationwide and Lloyds have all confirmed their customers on standard variable rate (SVR) and tracker mortgages will benefit due to the rate cut.
Barclays confirmed all its mortgage products that track the base rate will decrease by 0.25%.
Existing customers will see their rates change from June 1.
New customers will have access to the new lower rates from May 9.
Barclays’ standard variable rate mortgage is 3.49% above the base rate.
It currently stands at 7.99%, but following today’s announcement it will drop to 7.74% on June 1.
Nationwide customers will also see interest rate reductions of 0.25%.
Those on standard variable rate mortgages will start getting their new rate on June 1.
It will drop from 7.24% to 6.99%.Tracker mortgages will also reduce on June 1.
Homeowners with Lloyds will also see changes to their mortgage payments on June 1.
The Lloyds Bank Homeowner Variable Rate currently sits at 7.99% but will reduce to 7.74%.
Different types of mortgages
We break down all you need to know about mortgages and what categories they fall into.
A fixed rate mortgage provides an interest rate that remains the same for an agreed period such as two, five or even 10 years.
Your monthly repayments would remain the same for the whole deal period.
There are a few different types of variable mortgages and, as the name suggests, the rates can change.
A tracker mortgage sets your rate a certain percentage above or below an external benchmark.
This is usually the Bank of England base rate or a bank may have its figure.
If the base rate rises, so will your mortgage but if it drops then your monthly repayments will be reduced.
A standard variable rate (SVR) is a default rate offered by banks. You usually revert to this at the end of a fixed deal term, unless you get a new one.
SVRs are generally higher than other types of mortgage, so if you’re on one then you’re likely to be paying more than you need to.
Variable rate mortgages often don’t have exit fees while a fixed rate could do.
