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3 hours ago
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National Savings and Investments has bucked the trend in the savings market by increasing interest rates on fixed-term accounts.
The provider, which is backed by the Treasury and tasked with raising funds for government projects, has increased the returns it will pay savers by up to 0.31 percentage points, with the biggest rise available to those willing to lock in for five years.
On Thursday, the Bank of England said it would keep interest rates at 4% but there was speculation among City economists that there could be a decrease after the budget. Speculation that the next move will be downwards has caused other providers to cut interest rates in recent months.
Rates on NS&I’s one-year guaranteed growth and income bonds have gone up from 4.04% to 4.2%, two year versions of the bonds went from 3.85% to 4.1%, and three year bonds from 3.88% to 4.16%. Five-year bonds will now pay a fixed-rate of 4.15%, up from 3.84%.
NS&I, which has more than 24 million customers, said the higher rates would be available to new customers and those who had come to the end of their existing term and wanted to roll over their savings.
Sarah Coles, the head of personal finance at Hargreaves Lansdown, said the NS&I move was counter to the rest of the savings market, which had been “trending downwards”.
She added: “The fact NS&I has taken a step in the opposite direction is highly likely to be driven by a desire to get more money in through the door, to meet its funding targets.
“This time of year tends to see a significant number of fixed rate deals mature, so the organisation will hope its shiny new bond rates are enough to persuade customers to stay – and to tempt more in.”
Any sum between £500 and £1m can be invested in the bonds but money cannot be withdrawn early from the one-, two-, three- or five-year terms.
Andrew Westhead, the retail director of NS&I, said: “I’m pleased that we can offer increased interest rates on these fixed-term products, giving savers who want guaranteed returns a choice in how they invest, while continuing to benefit from the security of the 100% government guarantee.
“Today’s changes ensure we continue to balance the interests of savers, taxpayers and the broader financial services sector.”
Reports suggest Rachel Reeves, the chancellor, is considering a reduced cut to the annual cash Isa allowance after lobbying from building societies. The Financial Times reported that discussion in the Treasury centres on reducing the £20,000 allowance to £12,000, rather than the once mooted £10,000.
Coles at Hargreaves Lansdown said even with the rise in rates by NS&I, there were better options for savers elsewhere. “It’s much more tempting than it was – but that’s a fairly low bar. There will be those attracted by the brand, and those who are drawn by the fact their savings are 100% covered by the Treasury,” she said.
“That’s particularly appealing for those with higher balances who don’t want to have to manage a number of accounts in different places. However, the rises aren’t enough to get any of these deals into the top 10 accounts across any period, so they could do better elsewhere.”
LHV Bank is offering 4.46% on investments of £1,000 to £1m; JN Bank has a two- and three-year bond (for investments of £100 to £500,000) of 4.39% and Chetwood Bank is offering a five-year fixed rate savings account at 4.35% (with a minimum opening balance of £1,000).
