Rock bottom: NS&I hasn't raised interest rates for nearly six months for some savers

Better shopping savings rates: NS&I increases offers for 1.3 million customers

NS&I is raising rates with 1.3m savers receiving a £1bn interest BOOST, but there are still far better deals elsewhere…

  • NS&I’s Direct Saver, Income Bonds, Direct Isa and Junior Isa all rose
  • Direct Saver and Income Bonds increased from 0.5% to 1.2%
  • Its Direct Isa goes from 0.35% to 0.9% and its Junior Isa deal from 1.5% to 2.2%

More than 1.3 million savers will see their rates rise immediately after National Savings and Investments raised the interest offered on a number of its popular offers.

The Treasury-backed bank raised rates on its Direct Saver, Income Bonds, Direct Isa and Junior Isa.

It is the first time since February that NS&I has raised these rates – although the Bank of England has raised the base rate three times since then – from 0.5% to 1.25%.

However, this follows the more recent increase in the premium bond prize fund rate, which improved the odds of winning from 34,500 to 1 to 24,500 to 1 and saw an additional 1.4 million prizes paid during of the June 2022 draw.

Rock bottom: NS&I hasn’t raised interest rates for nearly six months for some savers

Direct savings and income bonds increased from 0.5% to 1.2%. These two accounts allow savers to withdraw money freely, when and how they want.

Someone hiding £10,000 in either account can expect to earn £120 over the course of a year – subject to further rate changes.

When it comes to easy-to-access offers, it’s comfortably ahead of the mid-market rate of 0.59%, according to the latest data from Moneyfacts.

But it falls short of the best easy access deals on the market. Al Rayan Bank currently pays 1.6%, while six other providers pay 1.5% or more.

NS&I also increased its Direct Isa from 0.35% to 0.9% and its Junior Isa agreement from 1.5% to 2.2%.

Its easily accessible cash Isa is ahead of the market average – 0.65% according to Moneyfacts. However, it once again falls comfortably below key market rates.

The best offer currently available is offered by the Newcastle Building Society, paying 1.5% – although savers are limited to three withdrawals a year.

Cynergy Bank and Shawbrook Bank currently pay 1.4% on their Isa transactions in cash, with no access restrictions.

His Junior Isa deal is much more competitive. The 2.2% rate places it among the top 10 offers currently available.

James Blower, founder of the Savings Guru, believes NS&I’s rate hikes aren’t generous enough given the pace at which savings rates are currently rising.

He said: ‘Savers who stuck with NS&I, after their savage cuts in December 2020, are at least now receiving a fair return, but there is still better value elsewhere with easy access rates of up to 1 .6%.

“While it’s good news that NS&I has finally responded to the market and raised rates, I don’t think they’ve gone far enough.”

“The market is moving fast and while they look okay at the moment, give it another 1-2 months and they’ll be late again.”

It should also be noted that for holders of guaranteed growth bonds, guaranteed income bonds and maturing fixed interest savings certificates, rates are also increasing, although they are not available for new savers.

In total, NS&I’s rate hikes will mean its savers will receive £1.1 billion in extra interest from today, according to analysis by AJ Bell.

He revealed that savers in accounts still open to new customers will see their interest collectively increase by £373m from today, while those in closed accounts will see an increase of £742m.

To learn more about which NS&I deals have seen rate hikes, you can find out here.



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