NS&I has increased the rates on its British Savings Bonds, responding to changes in the fixed-term savings market. The provider said the move will help meet its net financing target while balancing the interests of savers, taxpayers, and the financial services sector.
New Rates and Bond Terms
British Savings Bonds are fixed-term issues of NS&I's Guaranteed Growth Bonds and Guaranteed Income Bonds. New issues of one, two, three, and five-year bonds have gone on sale. The one-year bonds now pay 4.69% AER, up from 4.50%; two-year bonds pay 4.67% AER, up from 4.48%; three-year bonds pay 4.65% AER, up from 4.45%; and five-year bonds pay 4.55% AER, up from 4.40%. The new issues are available to both new and maturing customers.
Green Savings Bonds Also Increased
A new issue of NS&I's three-year Green Savings Bonds has been released with an increased rate of 4.45% AER, up from 3.82% previously. Andrew Westhead, NS&I retail director, said: “We regularly review our products to ensure they reflect current market conditions, and today’s increases respond to changes in the fixed-term savings market. Our fixed-rate bonds offer savers the choice of different term lengths with the certainty of knowing the interest rate they will receive over the full term, alongside the reassurance that all money invested with NS&I is 100% secure.”
Market Context and Expert Analysis
NS&I is backed by the Treasury, providing 100% security for all funds. Sarah Coles, head of personal finance at AJ Bell, commented: “The savings market is impressively competitive right now, and NS&I has entered the fray. Since the last time NS&I hiked its fixed-rate deals, future rate expectations have fallen, which should be putting downward pressure on rates. However, banks are pulling out all the stops to compete, keeping fixed-rate deals higher and forcing NS&I to raise rates again to attract the cash it needs.”
Coles noted that NS&I is bucking the trend of the fixed-rate market, which now rewards savers slightly more for tying up cash for longer. “NS&I is still offering the best rate on its one-year fix. This is likely to be an indication of what’s going on behind the scenes. The one-year market takes more money than any of the other fixed-rate periods.”
Green Bonds Decision
Regarding the Green Bonds, Coles added: “The hike in the Green Bonds is a separate decision, because it doesn’t count towards the net financing target. The rise is striking though, from a fairly miserable 3.82% to a reasonably competitive 4.45%. The gap between these bonds and the ordinary three-year bonds is much narrower now, so the price you pay for knowing your money is funding green projects has fallen. This is a significant departure, and seems to suggest that the previous policy of hoping green-conscious savers would be happier to overlook a much lower rate for the bonds just wasn’t working in attracting the cash they wanted.”
