National Savings and Investments (NS&I) is being urged to offer a high interest rate for its recently announced British Savings Bond as customers could “look elsewhere”.
The financial institution, widely known for its Premium Bonds product, will offer a three-year interest rate for its latest offering.
However, it was not revealed what the rate will pay when it was confirmed by Chancellor Jeremy Hunt during this week’s Spring Budget.
This comes as savers are looking to secure competitive interest rates on savings accounts ahead of the Bank of England's expected cut to the base rate later this year.
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British Savings Bonds will be available through NS&I from April
GETTY/NS&I
The central bank has raised interest rates to 5.25 per cent, and kept them at this level since August 2023, in its fight against inflation.
However, with the Consumer Price Index (CPI) rate easing to around four per cent in recent months, analysts are pricing in a rate reduction from the Bank in the latter half of 2024.
While homeowners and borrowers have been saddled with soaring repayments due to interest rate hikes, savers have been one of the few groups to benefit from the Bank of England’s decision.
Mr Hunt will no doubt be hoping NS&I’s new bond product will be appealing to those looking to bolster their savings as he tries to encourage investment in UK assets.
According to Martin Lewis, the interest rate would need to be over five per cent for the British Savings Bond “to be worth it”.
Rachel Springall, a finance expert at http://Moneyfactscompare.co.uk , noted that NS&I is a “trusted brand” but said the financial institution must offer a competitive rate to attract savers.
She said: “The interest rate offered will need to be carefully thought out by NS&I, considering the current state of the savings market, or it could risk being overlooked.
“As we have seen in the past, NS&I products are popular, but savers will look elsewhere if a much higher rate can be obtained.
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The Bank of England base rate is at a 15-year high of 5.25 per cent GB NEWS“The Chancellor said the fixed bond will have a three-year term, which may be too much commitment for some savers. Our Moneyfacts Best Buys show many short-term bonds pay more than 5%, but three-year bonds pay much less.”
According to data from Moneyfacts, the average one-year fixed savings rate today is 4.58 per cent which is down from 4.60 per cent yesterday.
Similarly, the average one-year fixed cash ISA has fallen from 4.50 per cent to 4.49 per cent over the same period, while the average easy access ISA is at 3.35 per cent from 3.36 per cent.
However, the average easy access savings rate today is 3.17 per cent which is unchanged from the previous working day.