In a surprising move that defies current market conditions, National Savings and Investments (NS&I) has announced significant increases to its fixed-term savings account interest rates. The Treasury-backed provider, which plays a crucial role in raising government funds, has boosted returns by as much as 0.31 percentage points.
Rate Increases Across Multiple Terms
The most substantial improvement comes for savers willing to commit their funds for five years, though all fixed terms have seen welcome boosts. The one-year guaranteed growth and income bonds have jumped from 4.04% to 4.2%, representing a solid improvement for short-term savers. Two-year versions of these bonds have increased from 3.85% to 4.1%, while three-year bonds now offer 4.16%, up from their previous 3.88%.
Perhaps the most dramatic change affects the five-year bonds, which will now pay a fixed rate of 4.15% – a substantial increase from the previous 3.84%. These enhanced rates are available to both new customers and existing savers whose fixed terms are concluding and wish to reinvest their money.
Countering Market Trends
This development comes at a time when most providers have been reducing their savings rates. The Bank of England's recent decision to maintain the base rate at 4% has been accompanied by speculation among City economists about potential decreases following the upcoming budget. This anticipation of lower rates has prompted many financial institutions to cut their offerings preemptively.
Sarah Coles, head of personal finance at Hargreaves Lansdown, commented on NS&I's unusual strategy. "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," she explained. Coles noted that this period typically sees numerous fixed-rate deals maturing, presenting NS&I with an opportunity to retain customers with more attractive rates.
Weighing the Options for Savers
While NS&I's rate increases are noteworthy, financial experts caution that better deals may still be found elsewhere in the market. The provider's unique position as a Treasury-backed institution means savings up to £1 million enjoy 100% government security, a particular advantage for those with substantial balances who prefer not to spread funds across multiple institutions.
However, as Coles pointed out, "the rises aren't enough to get any of these deals into the top 10 accounts across any period." Savers willing to shop around will find competitors such as LHV Bank currently offering 4.46% on investments from £1,000 to £1 million, while JN Bank provides 4.39% on two- and three-year bonds.
Andrew Westhead, NS&I's retail director, emphasised the provider's balanced approach: "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."
With 24 million customers across the UK, NS&I remains a significant player in the British savings landscape, though savvy investors may want to compare these improved rates against other market offerings before committing their funds to fixed-term arrangements.
