HSBC steps up current account war with 8% savings rate

HSBC will up the stakes in the UK consumer banking war today, offering new and existing current account customers the chance to open a savings account paying 8 per cent interest for the first year.

The deal comes just days after Lloyds TSB made its own play to take a bigger bite of the UK current account market, announcing it was offering customers a £50 handout if they opened an account with them.

Meanwhile, Halifax will launch a cash-back current account this week - the first to pay customers cash back on all purchases they make on their debit card. Typically, cash-back deals have been available only on credit cards.

Most of the new deals come with a number of terms and conditions, however. Customers must have a monthly net salary of £1,000 to qualify for the Halifax account. Meanwhile, the savings rate offered by HSBC will be more than 1 per cent better than the leading market rate.

Customers must make a monthly payment of between £25 and £250 into their savings account to qualify for the full 8 per cent. They will also not be able to withdraw their money during the year, without losing most of the interest. However, HSBC said contribution holidays can be taken if the "unexpected" happens.

Michael Geoghegan, the chief executive, said: "HSBC's new regular saver aims to help consumers rediscover sensible long-term savings habits, as well as reward anyone who banks with us with the best value going."

He added: "With the majority of savers spending their spare cash on luxury items, our 8 per cent rate aims to be a much-needed incentive to kick-start their regular savings habit."

Moneyfacts, the financial research publication, warned consumers to be wary of short-term offers. "Customers should not be lured into short-term deals without checking out what other options are available," Andrew Hagger, a spokesperson for the group, said. "They need to consider their own financial requirements; for example, are they looking for a high rate of interest on their current account or a low rate for their overdraft needs?"