What the NS&I rate hike means for savers

NS&I is known for offering middle-of-the-road savings products, backed by a venerable and trusted brand. So, it came as a surprise when it offered up a chart-topping rate over one year. And because of the power of NS&I, the impact of the rate hike could reverberate across the savings market.

The NS&I rate hike on its one-year Guaranteed Growth Bonds (6.20% AER/Gross) and Guaranteed Income Bonds (6.20% AER/6.03% Gross) means they’re now the most competitive one-year fixed rate savings accounts on the market.

For the vast majority of the time, NS&I applies the time-honoured rule that it wants to offer something good enough to attract our cash, but without paying over-the-odds for it.

This is because it has three responsibilities – to savers (who want a decent rate), taxpayers (who will pay this rate) and the industry (who don’t want to be unsettled by a treasury-backed product shooting the lights out).

Why has it raised its one-year fixed rate?

The offerings reflect the fact the organisation has a fairly punchy net financing target of £7.5 billion (plus or minus £3 billion) in this financial year.

This is an especially ambitious target considering people’s finances are under so much pressure that they’re spending their savings to make ends meet. Plus, you generally can’t withdraw from a fixed term product until the term ends.

Our savings and resilience tool found that more than one in four people have seen the cost of their usual spending rise above their income – forcing more of them to eat into their savings.

It means NS&I has thrown its weight behind a really striking rate to attract whatever cash is still around.

Will the NS&I rate hike influence the savings market?

Its impact on savers depends on how long it sticks around for.

There’s a chance these rates could already be on their way out, in which case only the speedier savers will benefit.

However, if they hang on for longer, it could well influence the wider market – pushing other banks to pay higher rates. And there’s a possibility we’ll see other generous offers.

We’re also around a year down the track from when we saw a flurry of people start fixing their savings – after rates boomed in the wake of the mini budget. We’re expecting a wall of cash to be maturing over the next few months, so other banks could decide that now is the time to stand out.

This would be a turnaround in expectations because many were expecting fixed term bonds to peak over the last few months.

Either way, its brilliant news for savers. If they’re quick, they can snag a top rate with a 100% treasury guarantee. Or they can take advantage of a more competitive market if these rates hang around.

This article gives you information to help you make the most of your money, but it isn't personal advice. If you're not sure if a certain action is right for you, seek advice. Inflation reduces the future spending power of money.

How to stay in control of your savings

Competition between savings providers is constant. And when rates are moving fast, a savings platform like Active Savings can put you back in control.

By working with a host of banking partners offering a range of savings products, it means we can bring you competitive rates. You can save and switch between products and banks in a few clicks, through one online account.

When a fixed term ends, you can choose another product straight away, without opening a new account. You can also choose between shorter terms including three, six and nine months, which lots of banks don’t offer.

New rates are added and removed all the time, so check our website for the latest.

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This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money. Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).

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