NS&I boosts interest rates on fixed-term savings products

Government-backed savings bank NS&I has increased the interest rates on some of its fixed term accounts by up to 1.15 per cent. 

Its popular one-year Guaranteed Growth Bonds have risen from 4 per cent to 5 per cent, while its Guaranteed Income Bonds have gone from 3.97 per cent to 5.12 per cent.

Savers opting for the one-year Guaranteed Growth Bonds will need £500 to get started and can deposit up to £1million in the Treasury-backed account.

Rate hike: Popular one-year Guaranteed Growth Bonds have seen their interest grow to 5%

However, they will not be able to withdraw any money until the bond reaches the end of its term.

Someone stashing £10,000 in this account will earn £500 of interest over the course of the year. 

The Guaranteed Income Bonds work in much the same way, except for the fact they pays out interest every month.

Meanwhile, NS&I’s two-year and three-year Guaranteed Growth Bonds and Guaranteed Income Bonds will also be increasing from today to 5.10 per cent, albeit only for existing customers who reach the end of a previous fixed deal.

The changes to NS&I’s fixed-term products come two weeks after it announced interest rate increases on a number of its variable products, which are also effective from today. 

NS&I customers holding Direct Saver and Income Bonds will see the return on their savings boosted to 3.4 per cent from 2.85 per cent from today.

Dax Harkins, chief executive of NS&I.

These accounts may appeal to anyone who wants the ability to access their cash as and when they wish. 

Dax Harkins, chief executive of NS&I said: ‘Guaranteed Growth Bonds and Guaranteed Income Bonds are popular with our customers and I’m pleased that we’re able to announce these changes today for new and existing customers to take advantage of.

‘Customers holding Direct Saver and Income Bonds will also see a boost from today, with their interest rates going up, and millions of Premium Bonds holders will also have a better chance of winning a prize from the next draw.

‘Customers who already have one-year Guaranteed Growth Bonds and Guaranteed Income Bonds will continue on their original fixed rate, but at the end of the term, they can roll over into a new term at the rate on offer at that time.’

It’s also worth noting that from August, the Premium Bonds prize fund rate is also set to increase from 3.7 per cent to 4 per cent, with the odds of each £1 bond winning improving from 24,000 to 1 to 22,000 to 1.

How do they stack up against the savings market?

If you’re hunting for the market-leading rate, then NS&I’s new deals are unlikely to take your fancy.

The average one-year fixed rate currnently pays 5.03 per cent, according to Moneyfacts, which is broadly in line with what NS&I is now paying.

However, savers can do much better on the fixed rate savings market. Check out the best fixed rate savings deals here.

The best one-year fix is currently offered by Monument Bank and pays 6.05 per cent.

Someone putting £10,000 in this account will earn £620 of interest over the year.

NS&I’s Direct Saver and Income Bonds, which allow savers to withdraw their cash as and when they like, also falll short of the best easy-access savings deals offered by banks and building societies. 

The best easy-access rates now pay north of 4.25 per cent. Check out the best easy-access rates here.

While most savings accounts offer FSCS deposit protection up to £85,000 per person (or £170,000 in the case of joint accounts), all products offered by NS&I offer 100 per cent capital security backed by the Treasury, so ultimately may still appeal to those with large amounts of savings.