NS&I raises interest rates on two savings accounts – how do they compare?

NS&I has raised interest rates to 4.18% for new issues of NS&I’s 1-year-fixed-term British Savings Bonds, after recently cutting rates on longer-dated bonds.

New issues of NS&I Guaranteed Growth Bonds, where your money is locked away to grow for a year with interest compounded, will have an interest rate of 4.18%, up from 4.05% when rates were changed in April.

Meanwhile, new issues of Guaranteed Income Bonds, where your money is locked away for a year with interest being paid to you monthly, will have a gross interest rate of 4.11%, but an AER of 4.18%.

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The new bonds can be bought from today, 24 July, and are available to new customers and those with existing NS&I one-year bonds that mature soon.

The interest rate boost will be good news for savers after NS&I cut rates on longer-dated bonds earlier in July.

Two, three, and five-year fixed term bonds all saw their interest rates tumble to below 4%, while NS&I has also gradually lowered the Premium Bonds prize fund rate.

Andrew Westhead, NS&I Retail Director, said: "I am pleased that we can offer savers – both new, and those with our existing 1-year Bonds which are about to mature – this new opportunity to save.

“In launching this new Issue, NS&I continues to balance the interests of its savers, taxpayers and the broader financial services sector – and to work towards its annual Net Financing target.”

Source: NS&I, 24 July

How do NS&I’s fixed bonds compare to others on the market?

While an interest rate boost will be welcomed by savers who value the security that NS&I offers, the new rates are not as high as the best one-year fixed savings accounts currently on the market.

Laura Suter, director of personal finance at AJ Bell, said savers "shouldn't get too excited," as the increases "nudge the bonds closer to the top of the best buy tables, but they’re still nowhere near leading the pack".

Consumers who want to lock their money away to grow for a year can get an interest rate as high as 4.6% if they go with the top fixed term savings account on the market by AlRayan Bank.

Those wanting to make the most of this market-leading interest rate will have to put in a minimum of £10,000 and a maximum of £85,000, with interest paid on maturity.

The second-best one-year fixed rate bond from Conister Bank pays 4.53% interest with a minimum opening amount of £5,000.

Alternatively, savers who want to grow their money for a longer period of time can opt for a two-year fixed rate bond. The market leader for this type of account is Castle Community Bank, which pays 4.38% on balances between £1,000 and £85,000.

Meanwhile, the best easy-access savings account in terms of interest rate is currently with Chase Bank, paying 5% on balances up to £3,000,000. However, this includes a bonus rate of 2.17% for 12 months.

We compare the best savings accounts for the highest interest rates on the market in a separate article.