Lloyds TSB offers top current account rate

Lloyds TSB, one of Britain's largest banks, yesterday intensified pressure on rivals by launching a market-beating interest rate on current accounts.

The bank, which controls 24 per cent of the current account market, said interest could rise to as much as 3.2 per cent.

New and existing customers will be eligible for the increase from 10 February, as long as they register with Lloyds over the internet and pay in £2,000 a month. Those who pay in £1,000 a month will receive 2.53 per cent.

After registering, customers can then carry out transactions in branches and over the phone. They will also be in line for a reduction in their agreed overdraft rate. The 32-fold increase in credit interest, predicted by brokers to cost Lloyds in the "low tens of millions", might force other high street banks to follow suit. At the moment most only pay customers 0.1 per cent in credit interest.

The paltry amount has angered consumer groups. Lloyds, Barclays, HSBC and Royal Bank of Scotland, which includes NatWest, control 75 per cent of the market. HBOS, the Halifax and Bank of Scotland group, upped the ante last year by introducing a current account that pays 3 per cent.

Eric Daniels, the head of retail banking and Lloyds' chief executive-designate, said: "We believe this provides a compelling reason for customers to do business with us. This current account provides the best credit interest on the high street."