National Savings and Investments sets the trend in the savings market by increasing interest rates on fixed-term accounts.
The Magtatagana, which is supported by the treasury and tasked with raising funds for government projects, increased the recomts of those who are ready to be locked in those who are ready to be locked in five years.
On Thursday, the Bank of England said it would keep interest rates at 4% but there was speculation among City economists that there could be a cut after the budget. Assuming that the next step will fall in the lower providers will prevent the interest rates in the current months.
Rates on one-year guaranteed growth and income range from 4.04% to 4.2%, and three-year bonds from 3.1% to 4.88%. The five-year bonds now pay a signature rate of 4.15%, up from 3.84%.
NS&I, which has more than 24 million customers, said the higher rate will apply to new customers and those who have reached the end of their term and want to roll over their savings.
Sarah Coles, head of Personal Finance at Hargreaves Lansdown, said NS&i was moving against the rest of the savings market, which was “trending down”.
He added: “The fact ns & I took a step in the opposite direction is likely motivated by a desire to get more money in the door, to meet funding targets.
“This time of the year has the possibility to see a significant number of rate signatures that deal with maturity, so the organization will hope that the new bond rates will remain.”
Any amount between £500 and £1m can be invested in the bonds but the money cannot be withdrawn from one, two, three or five years.
Andrew Westhead, the retail director of NS&I, said: “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.
“Today’s changes will ensure that we continue to balance the interests of insurers, taxpayers and the financial services sector.”
Reports suggest that Rachel Reeves, the Chancellor, is considering a clip reduction in the annual cash ASA AS building allowance from building societies. The Financial Times reported that the discussion in the treasury centers on reducing the £20,000 allowance to £12,000, instead of the previous £10,000.
Coles at Hargreaves Lansdown say even with NS&I rates rising, there are better options for those driving elsewhere. “It’s a lot more reasonable than it used to be – but that’s a low bar.
“Especially attractive for those with higher balances who don’t want to manage multiple accounts in different places.
LHV Bank offers 4.46% on investments of £1,000 to £1m; JN Bank has a two- and three-year bond (for investments of £ 100 to £ 500,000) of 4.39% and a minimum opening rate of £ 1,000).