NS&I Raises British Savings Bond Rates Above 5 Percent

National Savings and Investments (NS&I) has raised rates on its British Savings Bonds, giving UK savers higher fixed returns across one, two, three and five-year products. The government-backed provider announced the changes as competition for deposits increases and some accounts now exceed 5 percent.

According to NS&I, the updated bonds are available to new customers and savers with maturing accounts. The one-year rate increased to 4.99 percent from 4.82 percent, while the two-year rate rose to 5.07 percent from 4.81 percent.

The three-year bond now pays 5.10 percent, up from 4.83 percent, and the five-year option increased to 5.17 percent from 4.85 percent, according to figures published by NS&I and reported by Yahoo Finance UK.

NS&I Retail Director Andrew Westhead said the rate changes were designed to respond to market conditions while maintaining the security of government-backed savings.

"We're pleased to be increasing interest rates across our one, two, three, and five-year British Savings Bonds, responding to changes in the wider market and giving savers the certainty of a guaranteed return for the duration of their chosen term." Westhead said.

He added that NS&I bonds provide full backing from HM Treasury for invested money.

"Alongside these improved rates, customers continue to benefit from the reassurance that all money invested with NS&I is 100% secure and backed by HM Treasury." Westhead said.

Financial experts noted that NS&I's higher rates remain competitive but are not the highest available in the market. Rachel Springall of Moneyfactscompare.co.uk said fixed-rate offers can disappear quickly when providers attract enough deposits.

"NS&I has given its British Savings Bonds a welcome boost, with rates rising across the board and its two, three and five-year options now paying above 5%." Springall said.

Springall said other providers still offer higher returns, with some fixed-rate accounts above NS&I's levels.

"Competition in the savings market is good news for consumers, but attractive deals don't always last for long, particularly if a provider attracts enough deposits and pulls a product from sale." Springall said.

NS&I bonds allow investors to place up to £1m per person in each bond issue, with a minimum investment of £500. The money cannot be withdrawn before the fixed term ends.

Personal finance experts also warned savers to consider access needs before committing funds. James Blower, founder of The Savings Guru, said current fixed rates appear attractive compared with expected interest-rate levels.

"With the base rate expected to rise to 4 per cent next month, and then see two or three further increases next year, rates as high as 5.12 per cent and 5.37 per cent are currently significantly ahead of those levels even if they do materialise." Blower said.

Blower said economic uncertainty could still affect future savings rates, particularly because of wider geopolitical pressures.

"Should this continue for much longer, or significantly worsen, then rates could rise even higher than current levels. But a lot of this is priced in so I do not expect significant upwards moves from here." Blower said.

Andrew Hagger, founder of MoneyComms, said savers with funds they can lock away may find current offers worth considering as fixed rates have risen.

"There's no guarantee that they will continue this upward trajectory, so if you've got some money you can afford to lock away for a year or two, now would be a good time to make that move." Hagger said.