- NS&I’s Green Savings Bond rate increased to 5.7%
- Rate is below market-leading three-year bond of 6.05%
- Interest is a huge increase on the 0.65% paid at launch two years ago
Laura Suter, head of personal finance at AJ Bell, comments on NS&I raising the interest rate on the Green Savings Bond:
“In its latest move to make its products more attractive, NS&I has hiked the rate on the Green Savings Bond up to 5.7%. The move means that the three-year bond is just shy of the market-leading rate for a three-year account, which stands at 6.05%*. On £10,000 of savings that means savers are sacrificing around £35 of interest a year to go green. The new interest rate puts the account just ahead of green-focused Gatehouse Bank’s three-year Woodland Saver, which pays 5.5% and plants a tree for every account opened.
“The rate on the bond now is a far cry from the 0.65% at its launch almost two years ago – partly reflecting the steep rise in interest rates in the savings market since then and partly as a result of slow initial take-up of NS&I’s newest product. Someone who put £5,000 into the bonds at launch will be earning just £32.50 a year in interest, compared to the £285 a year that a new customer will be getting today on the same amount. If they had invested £20,000 that difference in interest jumps to more than £1,000 a year.
“Anyone who has recently bought the bonds might have time to switch out and get a better rate. The bond has an initial 30-day cooling off period, where people can get their money back, but once savers are past that point they are locked in for three years. That means anyone who bought the bonds in the past 30 days could cancel their accounts and re-open a new one to benefit from the higher rate.
“For savers who are past the 30-day cooling off period it highlights the difficulty of navigating the fixed rate market at the moment, as rates are changing so quickly. No sooner will a saver have found a top-rate deal than rates elsewhere may increase. While we’re not expecting huge increases in Base Rate this year, it is expected to climb further from here, so savers need to think about whether fixed rates will improve after they have locked in. Three years is also a long time to lock away money with no chance of early exit, so savers need to be certain they won’t want to access the money in that time.”
*According to Moneyfacts, accurate to 22 August 2023.
