NS&I brings back one-year bond… at 4%

Savers are looking forward to a series of further interest rate hikes after the Bank of England raised its base rate, encouraging competition between providers.

A number of offers were launched last week ahead of Thursday’s decision by the Bank of England to raise key rates by 0.5 percentage point to a 15-year high of 4 percent.

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

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

The one-year Guaranteed Growth Bond pays 4 percent on fixed amounts, with interest paid at the end of the term. The Guaranteed Income Bond pays 3.9 percent, but interest is paid every month.

Those who are willing to tie up their money for longer can enjoy an even better return on their savings with NS&I. For example, the Guaranteed Growth Bond for two and five years now pays 4.2 and 4.25 percent respectively. Anna Bowes, co-founder of rate checker Savings Champion, says: ‘These are competitive deals worth considering.

But with the Bank of England’s recent hike in base rates, instant access variable rates are also worth looking at – they offer more flexibility to take your money. The best interest rate is now around 3 percent.’

Bowes says one-year bond with a better deal is offered by Charter Savings Bank, which pays 4.16 percent.

Shortly after the Bank of England announcement, digital bank Chase announced it would raise the interest rate on its popular savings account from 2.7 to 3 percent. The increase will take effect on February 13.

Only savers who shop around are likely to get a top rate on their nest eggs. As usual, it is the challenger banks and building societies that raise rates and offer competitive deals, while most major banks stubbornly refuse to pass on rate hikes.

It’s a subject that’s being scrutinized in the Commons this week (see page 65).

Rachel Springall, financial expert at interest rate regulator Moneyfacts, says: ‘Savers who don’t update their existing accounts to the latest top rates could be missing out. Loyalty doesn’t always pay off and the majority of the biggest major banks have failed to pass every increase in the Bank of England’s base rate into easily accessible accounts, with two brands having passed on just 0.54 per cent since December 2021. ‘

Myron Jobson, senior personal finance analyst at investment platform Interactive Investor, says, “Higher interest rates don’t always translate into higher savings rates. It could take months for interest rate hikes to trickle down to savers – or not at all.

“Due to the accelerated frequency of interest rate hikes, some savings providers can still catch up with the base interest rate hikes of the past.”