NS&I kills off top fixed-rate bond paying 6.2 per cent after just five weeks – are more rates about to fall?

NS&I kills off top fixed-rate bond paying 6.2 per cent after just five weeks – are more rates about to fall?

  • NS&I is pulling its unbeaten 6.2 per cent Guaranteed Growth Bonds from sale
  • But experts say this is bad news for two reasons, as more rates are likely to fall 

National Savings & Investments (NS&I) has pulled its best-ever savings bond, which paid 6.2 per cent – and experts say this could mean more rates start to fall.

NS&I today announced it is withdrawing its one-year Guaranteed Growth Bonds at 6.2 per cent, after launching the deal just over a month ago. 

The unbeatable deal led the best buy table for weeks, with the next closest rate being 6.11 per cent, from Union Bank of India, Oxbury and Smart Save.

NS&I is also withdrawing its one-year Guaranteed Income Bonds, which also paid 6.2 per cent, with interest paid monthly.

Savers flocked to the NS&I deals, with 225,000 signing up.

Best buy: NS&I’s unbeatable savings rate led the best buy tables for over a month

NS&I chief executive Dax Harkins said: ‘This summer’s new one-year fixed-rate bonds have been a great success. I am pleased we were able to keep them on sale for over five weeks, enabling more than 225,000 savers to benefit from the highest interest rates we have ever offered on these products.’

Both bonds were pulled from sale this morning, but NS&I said it will honour postal applications ‘for a reasonable period’.

What next for bond rates? 

Experts say the withdrawal of NS&I is bad news for competition, and that rates are now likely to fall.

The 6.2 per cent rate was not just the best on the market for one-year bonds, it also encouraged other banks to raise their rates too.

Anna Bowes, founder of savings experts Savings Champion, said: ‘All the top five best-buy bonds paid 6 per cent until NS&I launched that rate. As that bond has been withdrawn, I’m afraid I would expect the competition in the one year best buys to wane again.’

Not only this, but many savings deals factor in the rises and falls of Bank of England base rate.

This is currently 5.25 per cent, after the Bank froze the rate in its decision last month. 

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Additionally, many of the best-buy fixed rates have been priced assuming base rate would rise last month.

As this did not happen, it is likely fixed-rate bond rates will fall.

Bowes added: ‘These bonds have been priced expecting the base rate to go higher than it’s gone anyway. I was surprised when NS&I launched that bond at such a high rate, and it seemed to generate a bit of additional competition.’ 

Why was the 6.2 per cent NS&I rate so high?

Many savings experts raised an eyebrow when NS&I launched its 6.2 per cent best buy rate.

Normally NS&I prices its deals very carefully, and they almost never pay a market-beating rate.

It does this because the state-owned savings firm has to balance its main goal – raising money for the Treasury – with not killing off competition from private banks.

The reason for the unusually good 6.2 per cent rate was to help NS&I meet its targets from the Treasury for how much cash it has to raise for the 2023/24 year.

Read more at DailyMail.co.uk