NS&I announces huge savings rate hikes on bonds and ISAs

NS&I increases rates on a range of savings products by up to 1.75%, but Premium Bonds remain unchanged.

Savers have been given a massive boost after NS&I announced dramatic rate hikes on several products.

The state-backed saving institution said various bonds, ISAs and saving certificates will rise by between 0.39% and 1.75%.

The rate hikes will be applied to both existing savings accounts as well as those that are closed to new savers.

Some will take effect immediately, while others will be rolled out in December.

Sadly, the hugely popular Premium Bonds will not be included in the changes and remain at 2.2%.

Now let’s take a look at how the rates will change and how they compare to the best savings products out there.

NS&I rate hikes: what’s changing?

Starting with variable rate products, savers who hold a Direct ISA will see their interest rate rise by 0.85% to 1.75% from today, while those who hold Income Bonds and Direct Savers will see their rate rise by 0.6% to 1.8%. 

Junior ISA (0.5% increase) and Investment Accounts (0.39% increase) will also see rates rise from today.

Take a look at the table below to see the new rates.

Variable rate savings products

On the fixed-rate side, the increases have been far more dramatic. All will kick in as of 1 December 2022.

Holders of Guaranteed Growth Bonds will see their rates rise by between 1.15% and 1.75% depending on the specific type of product they hold.

Similarly, Guaranteed Income Bond rates will rise by between 1.1% and 1.7%.

Holders of Fixed Interest Savings Certificates will enjoy a more moderate increase of between 1.1% and 1.25%.

You can see the full details of the changes in the table below.

It’s worth stressing that none of the fixed-rate products are currently open to new savers and the hikes are merely being passed on to existing account holders.

Fixed-rate savings product increases

Are the new rates competitive?

Speaking about the increases, NS&I chief executive Ian Ackerley said the changes “mean that our products are priced appropriately when compared with the interest rates offered by our competitors.”

So, how do they compare?

Despite the dramatic increases, most of the variable products remain some way off the very best in the market.

For example, the best easy access Cash ISA on the market currently pays 2.25% (from Coventry BS), whereas the NS&I Direct ISA offers 1.75%.

Similarly, the NS&I Junior ISA’s rate of 2.7% falls short of the 3.1% you can get from Coventry BS, while the Direct Saver (1.8%) account pays 0.95% less than the best comparable easy access account (2.75%) on the market.

In terms of the changes announced to the fixed-rate products, there isn't much point in comparing them to the best as none of them are actually open to new savers.

NS&I offers additional security

One thing to keep in mind is that, as a state-backed institution, it isn't really trying to offer the absolute best rates on the market.

As we explain here, it needs to tread a fine line between providing attractive accounts that bring in money that the Government can borrow and not dominating the banking market.

One of the big plus points about being state-backed is that it offers additional safety compared to traditional banks, which only cover deposits up to a maximum of £85,000 under the Financial Services Compensation Scheme.

For some savers, this increased protection is worth sacrificing some of their interest rate.

Do you have savings stashed in various pots? Raisin is a great service that helps you open and manage numerous savings accounts in one place. Head this way to compare rates, or simply learn more about how it works.