NS&I brings back one-year bond… at 4%

Savers are looking forward to a raft of new increases in their interest rates after the Bank of England pushed up its base rate – encouraging competition among providers.

A number of offers were launched last week even before Thursday’s decision by the Bank of England to raise the base rate by 0.5 percentage point to a 15-year high of 4 per cent.

National Savings and Investments (NS&I) revealed it is bringing back its Guaranteed Growth Bond for new customers – paying 4 per cent on its one-year fixed rate deal.

Aimed at savers with a minimum of £500 who are willing to tuck away their cash for 12 months, this is the highest rate of interest offered on this bond for 13 years. The popular investment was pulled for new customers four years ago when savings rates were at a record low.

The one-year Guaranteed Growth Bond pays 4 per cent on lump sums with interest paid at the end of the term. The Guaranteed Income Bond pays 3.9 per cent, but interest is paid out every month.

Boost: Aimed at savers with a minimum of £500 who are willing to tuck away their cash for 12 months, this is the highest rate of interest offered on this bond for 13 years

Those willing to tie their money up for longer can enjoy even better returns on their savings with NS&I. For example, the Guaranteed Growth Bond for two and five years is now paying a respective 4.2 and 4.25 per cent. Anna Bowes, co-founder of rate scrutineer Savings Champion, says: ‘These are competitive deals worth considering.

‘But with the recent Bank of England base rate rise, instant access variable rates are also worth looking at – offering greater flexibility for getting your cash out. The best interest rates are now close to about 3 per cent.’

Bowes says a better deal one-year bond is offered by Charter Savings Bank, which is paying 4.16 per cent.She points to Shawbrook Bank offering 2.92 per cent interest as one of the best variable rate instant access deals on the market.

Shortly after the Bank of England’s announcement, digital bank Chase announced it was increasing the rate on its popular saver account from 2.7 to 3 per cent. The rise will take effect from February 13.

Only savers who shop around will likely get a top rate on their nest eggs. As usual, it is the challenger banks and building societies raising rates and offering competitive deals, while most of the high street banks obstinately refuse to pass on rate rises.

It is a subject that will come under scrutiny in the Commons this week (see page 65).

Rachel Springall, financial expert at rates scrutineer Moneyfacts, says: ‘Savers who fail to review their existing account to the latest top rates may miss out. Loyalty does not always pay and the majority of the biggest high street banks have failed to pass every Bank of England base rate rise to easy access accounts, with two brands passing on just 0.54 per cent since December 2021.’

Myron Jobson, senior personal finance analyst at investment platform Interactive Investor, says: ‘Higher interest rates do not always translate to higher savings rates. It could take months for the increase in interest rates to trickle through to savers – if at all.

‘The acceleration in the frequency of rate rises has meant that some savings providers may still be catching up to past base rate rises.’

This post first appeared on Dailymail.co.uk