National Savings and Investments has raised interest rates on its British savings bonds, with several products now exceeding 5% for the first time in nearly three years. The bonds are available in one-, two-, three-, and five-year fixed terms, with rates ranging from 4.99% to 5.17% depending on the term length. Growth bonds compound interest annually and pay out at maturity, while income bonds distribute interest monthly.
The broader savings market has become increasingly competitive, leading to elevated interest rates across multiple providers. However, financial experts caution that superior rates often prove temporary once providers accumulate sufficient deposits. Rachel Springall from Moneyfactscompare.co.uk noted that providers typically withdraw products from sale once they have attracted adequate savings volumes. While NS&I’s rates are described as competitive, analysts indicate that higher returns remain available elsewhere in the market.
Top-paying alternatives include a 5.12% rate on a one-year fixed bond from Union Bank of India and a 5.37% rate on a five-year product from GB Bank. The NS&I bonds offer notable advantages for large investors, allowing deposits up to £1m per person per bond issue with a minimum investment of £500. Unlike most banks, which guarantee savings only up to £120,000, NS&I is backed by the Treasury and secures 100% of deposits above that threshold.
For those requiring liquidity, easy-access accounts provide flexibility with penalty-free withdrawals. Starling Bank announced a 5% interest rate on its Easy Saver account for new customers and those opening current accounts after 1 October, though this promotional rate applies only to balances up to £25,000 and includes a six-month fixed bonus component. Marcus by Goldman Sachs meanwhile increased its one-year fixed-rate account from 4.3% to 4.75% this week.
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