NS&I, the Government-backed savings provider, has announced interest rate increases on several of its products, including British Savings Bonds, while leaving the Premium Bonds prize fund rate unchanged for now. This move comes amid a shifting savings landscape following multiple Bank of England base rate cuts.
British Savings Bonds Rate Increases
The new issues of British Savings Bonds offer higher fixed rates across all terms. The updated rates are as follows:
- 1-year Guaranteed Growth Bond: 4.5% (up from 4.07%)
- 1-year Guaranteed Income Bond: 4.5% (up from 4.07%)
- 2-year Guaranteed Growth Bond: 4.48% (up from 3.98%)
- 2-year Guaranteed Income Bond: 4.48% (up from 3.98%)
- 3-year Guaranteed Growth Bond: 4.45% (up from 4.02%)
- 3-year Guaranteed Income Bond: 4.45% (up from 4.02%)
- 5-year Guaranteed Growth Bond: 4.4% (up from 4.05%)
- 5-year Guaranteed Income Bond: 4.4% (up from 4.02%)
The postal-only Investment Account rate will also rise from 1% to 2.05%.
Premium Bonds Remain Unchanged
Following these increases, NS&I was asked whether the Premium Bonds prize fund rate would also rise. The prize fund rate was reduced from 3.6% to 3.3% in the April draw, with odds worsening from 22,000 to 1 to 23,000 to 1. An NS&I spokesperson said: "The interest rate increases announced yesterday reflect changes in the wider savings market and will help NS&I to meet its net financing target for 2026-27. NS&I reviews the interest rates on all of its products regularly and makes changes when appropriate."
Expert Analysis
Sarah Coles, head of personal finance at AJ Bell, highlighted three factors that could influence future Premium Bonds rate changes: the broader easy access savings market, Bank of England base rate decisions, and NS&I's net financing target. She noted that since the last cut, best easy access rates have fallen only slightly, making an immediate change unlikely. She added: "We're near the start of the financial year, so there's unlikely to be a desperate need for swift action. NS&I recently pushed up returns on fixed rate bonds, hoping to raise extra cash. If successful, no prize rate change may be needed. However, if competition heats up, the Bank raises rates, or NS&I falls short of its target, we could see the prize rate rise."
