Pocket money... avoid NS&I’s British Savings Bonds

⬤ NS&I’s British Savings Bonds, trumpeted in the recent Budget, have launched. The bonds will help people “save for the longer term”, while their money is “100% protected”, according to NS&I; savings will also “be invested back into supporting the UK”. You can secure a guaranteed fixed interest-rate for three years, and can’t access the money in that time.

That all sounds fine, but there is “nothing revolutionary about these accounts”, says Gavin Shepherd on MoneySavingExpert.

All NS&I accounts are 100% guaranteed and support the UK. That’s because NS&I is a government bank. Your deposits are backed by the Treasury and what you deposit is used to fund state spending.

What’s more, the interest rate of 4.15% is “disappointing, especially after the fanfare in the Budget, because it’s so far behind the market leaders”, Sarah Coles, head of personal finance at Hargreaves Lansdown told The Guardian. You could earn 5.1% on your money and get access to it a year earlier with iFAST’s two-year bond.

The best rate over three years is 4.7% from Atom Bank. Both these accounts would protect deposits up to £85,000 under the Financial Services Compensation Scheme (FSCS).

You don’t even have to lock your money away to surpass the rate offered on the British Savings Bonds. The Post Office pays 5.06% on its easy-access account. If you are looking to deposit under £20,000, then you could earn 4.39% tax-free with OakNorth Bank’s three-year fixed-rate cash individual savings account (Isa).

⬤ More and more homeowners are opting to extend their mortgage term in order to keep their monthly repayments down. Figures from UK Finance show that 24% of remortgages were taken out with terms of 30 years or more last December, up from 11% in December 2021. “Extending your mortgage term is one way of softening the effect of higher rates,” says George Nixon in The Sunday Times.

Someone who took out a £200,000 25-year mortgage at 2.5% two years ago would have repayments of £897. That would rise to £1,238 if they remortgage now onto a 5.81% rate. In this case, extending the mortgage term to 30 years would have cut repayments to £1,106.