NS&I’s prize rate could increase to retain Premium Bonds appeal as improved guaranteed-rate products draw their attention away
Premium Bond rates could finally be on the rise again after months of continual fall.
This has been attributed to improved guaranteed-rate products diversifying attention away from Premium Bonds, with the rate increasing as a result to hold attention.
The rate stands at 3.8%, having dropped from 4% from the April draw, but it looks like the National Savings and Investments (NS&I) could be set to raise rates in the coming months.
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Matthew Parden, CEO and co-founder of savings provider Marygold & Co., said: “NS&I has a history of adjusting the prize fund rate in response to market demand and funding requirements.
“If these newly improved guaranteed-rate products start to divert savers’ attention away from Premium Bonds, it wouldn’t be surprising to see the prize rate rise later this year to retain their appeal.
“NS&I’s decision to increase rates across eight of its Bond products and relaunch the 1 and 5-year British Savings Bonds, marks a significant shift in the UK’s savings landscape.
“With returns now reaching up to 4.1%, these fixed-term options are far more competitive, especially for cautious savers looking for guaranteed income during a time of ongoing economic pressure.
“The return of the 1 and 5-year terms, not available together since 2010, gives savers greater flexibility to align products with their financial goals.”
Matthew explained that the provider has likely increased the rates on its British Savings Bonds in efforts to meet its Net Financing target for 2025-2026.
The figure is £12 billion, which is an increase of 33% on the previous year.
It comes as the NS&I has launched a range of savings bonds for those wanting to keep their money for a better return.
The new one-year British Savings Bonds will pay 4.05% for both the growth and income options.
The five-year bonds will pay 4.06%, while the two and three-year versions of the bonds have now been boosted to 4% and 4.1%.
The new interest rate on the 5-year growth option is 4.06%.
Sarah Coles, head of personal finance at Hargreaves Lansdown said: “The rates have been bumped up slightly in order to meet a marginally higher funding target.”
