A major UK bank is set to make a huge change to its popular savings account in the new year. Monzo’s savings account went viral on TikTok with its “1p Challenge” a year ago. The idea is that the app automatically moves 1p from your main account into a savings pot on day one, 2p on day two, 3p on day three and so on until £3.65 on day 365.

The initiative helps customers tuck away a neat £667.95 cash pot by year-end. It was introduced as a great way to teach young adults how to save, with interest paid monthly. However, last week the Bank of England made a decision to cut interest rates to the lowest level in nearly three years, as inflation is expected to fall faster than previously thought.

The Bank’s Monetary Policy Committee (MPC) voted to reduce rates from 4% to 3.75%. Further reductions are set to be a “closer call”.

It’s a win for homeowners since mortgage rates have dropped, which could mark a “turning point” for the UK housing market – new research from We Buy Any Home showed more than half of would-be buyers are being put off by higher borrowing costs.

But savers are losing out on higher interest rates. Monzo told customers interest earned on the challenge would drop from 3.50% AER to 3.25% AER from January 6.

Customers with a Personal Instant Access Savings Pots will also see their interest cut from 3% AER to 2.75% on the same day.

The news comes as it was announced this month that millions of Monzo users nationwide will experience a major change to their app in the days leading up to Christmas. The digital bank has announced it is removing one of its most popular features and introducing an entirely new service in its place.

The Summary feature within the Monzo app allows customers to quickly view their current financial position while making budgeting more straightforward. Monzo discontinued Summary on December 21.