NS&I has reduced interest rates on its British Savings Bonds for the second time in months, citing changes in the wider market. The new rates, effective immediately, are below the best available savings accounts, with one-year Growth Bonds offering 4.07% and one-year Income Bonds paying 4.00%.
The cuts follow the Bank of England's decision in December to lower the base rate from 4% to 3.75%, the fourth reduction of the year. While this helped some mortgage borrowers, savers have seen returns fall. Most high-street banks now offer rates just above 4.2%, but NS&I's new bonds are all below that level, with half paying between 3.91% and 3.98%.
Kevin Mountford, co-founder of Raisin UK, warned savers not to become complacent: "NS&I cutting rates so soon after a November increase is a clear reminder that even the safest names do not always offer the best home for your savings. When rates are moving, doing nothing can be costly."
Sarah Coles of Hargreaves Lansdown noted that the November rate rise may have been a temporary measure to stem outflows. "The autumn and winter tend to see more fixed-rate accounts mature, so there's always a risk that savers will take their money and leave. This temporary boost was designed to stem the flow."
NS&I said the changes will help it meet its net financing target while balancing the interests of savers, taxpayers, and the financial services sector. The bonds, which are backed by the Treasury, require a minimum investment of £500 and a maximum of £1 million per person. Existing customers who have received maturity letters will retain the rates quoted.
