NS&I joins fixed rate bloodbath with 1.7% cut
ABLOODBATH in fixed-rate bonds is taking place as rates take a dramatic cut from some providers. Yesterday, National Savings & Investments (NS&I) slashed its three-year Green Savings Bond by a huge 1.75 percentage points, from 5.7 pc to just 3.95 pc.
Shockingly, it is the first time the Government-backed bank has offered less than base rate — currently 5.25 pc — on this eco-bond since its launch two years ago. The cut means savers taking out a bond now will earn £577 less interest over the term than if they had signed over £10,000 on Monday.
It is the largest drop so far after a frenzy of cuts in fixed rates from both banks and building societies.
Yesterday alone saw rates lowered at United Trust Bank, Ford Money, Investec, Atom, Shawbrook and Tandem. And it comes after a swathe of cuts last week from more than 20 providers.
Firms now drifting towards the top of the best buy tables will see a wall of money coming their way, as savers chase top rates. But that may soon see them close their top-paying accounts, too, as they attract more money than they are targeting.
The dramatic falls means that the 6 pc one-year fixed rate bonds savers could pick up from challenger banks (those who do not have a large High Street presence) have gone.
Higher rates from building societies such as Coventry and Cambridge at 5.75 pc have also been replaced by lower rates.
Banks and building societies go to the wholesale money markets to buy their fixed-rate, which they then offer to savers. But rates here have been falling. No one knows what will happen, but traders in this market predict lower interest rates.
This is good news for borrowers, but bad for savers.
Sarah Coles, head of personal finance at wealth platform Hargreaves Lansdown, says: ‘There is every chance they’re set to fall further, so if you’re planning to fix, don’t hang around.’
Some providers have cut their rates more than once. For example, Ford Money has hacked away at its rates in a series of cuts, from a top 6.05 pc.
Following its latest cut yesterday, it pays 5.65 pc to savers taking out a one- or twoyear bond now.
Other well- established challenger banks such as Aldermore, Shawbrook and Paragon have also been busy cutting rates, to between 5.2 pc and 5.55 pc on one-year fixed rate bonds. Rates on longer-term bonds are also down. RCI Bank has gone from 5.65 pc to 4.7 pc.
Top rates on one-year bonds include United Trust at 5.80 pc, Secure Trust at 5.76 pc and 5.75 pc from Close Brothers.
There are higher rates on offer from less well- known newcomers, as they have to offer top rates to attract money.
JN Bank UK pays 5.9 pc for one year. The bank is the UK arm of JN Bank National Group, which has been operating in Jamaica for 150 years. It set up in the UK in December 2019.
Your money with the UK bank is covered by the Financial Services Compensation Scheme, which means you will be reimbursed up to £85,000; £170,000 for joint accounts within seven days if it runs into trouble.
Of course, there is no suggestion that this will happen, but some savers might feel uncomfortable going with a new name for just a small amount of extra interest.
A £10,000 sum here will give you £590 a year, just £10 more than with the better-known United Trust Bank.
Fixed-rate cash Isa rates have also nose- dived. Virgin Money has sliced its one-year rate from 5.75 pc to 5.31 pc.