• NS&I announced it will raise interest rates on both its Direct Saver and Income Bonds to 0.5% from today.
• Interest rates for both products had previously been 0.35%.
• While a welcome boost these rates still fall short of the top rates being offered on the market.
• It said the increase will also help NS&I meet its Net Financing target for 2021-22 of £6 billion, in a range of £3 billion to £9 billion.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

“It is hugely positive to see NS&I boosting rates on these products, but they still remain some way off meeting the best rates available on the market. The best easy access savings rate available is currently 0.71% so savvy savers willing to shop around can still find better places to stash their cash.

They may prove tempting for those with very large amounts of savings who welcome the extra protection offered by Treasury. You can hold up to £1 million in Income Bonds and £2 million in the Direct Saver, and it’s all protected by the Treasury. It’s worth saying though that the first £85,000 held with any institution is protected by the Financial Services Compensation Scheme so this will cover most people.

However, it is welcome to see savings rates, long in the doldrums, starting to respond to recent Bank of England interest rate rises. This is the second interest rate boost for these products in recent months as they were increased from 0.15% to 0.35% in December. While still far from market leading, they are a vast improvement on rates that went as low as 0.01% for some of its products and sent customers rushing to the exit.

These mega-low rates meant NS&I undershot its fundraising target in 2020/21 by quite some way and given that in Q2 it had only raised 0.6bn of its £6bn target for this year it’s clear strong action needed to be taken. Whether today’s boost is enough to tempt savers back and close this yawning gap remains to be seen.”