NS&I Increases Interest Rates to 4.18% for Fixed-Term Bonds

National Savings and Investments (NS&I) has announced an increase in interest rates for its savings products, bringing the rate for new issues of the 1-year fixed-term British Savings Bonds to 4.18%. This change, effective from July 24, 2025, follows a recent reduction in rates for longer-dated bonds, which have seen significant declines.

The new interest rate for NS&I Guaranteed Growth Bonds will also be 4.18%, an increase from 4.05% as of April 15, 2025. For those opting for Guaranteed Income Bonds, which lock in funds for a year with monthly interest payments, the gross interest rate will rise to 4.11%, yielding an annual equivalent rate (AER) of 4.18%. These new bonds are available to both new customers and existing NS&I bondholders whose investments are nearing maturity.

This rate increase is particularly welcomed by savers, especially after NS&I’s earlier decision to cut rates on two, three, and five-year fixed-term bonds to below 4%. Additionally, the Premium Bonds prize fund rate has also been reduced, impacting the potential returns for existing customers.

Andrew Westhead, NS&I’s Retail Director, expressed satisfaction with the new rates, stating, “I am pleased that we can offer savers – both new, and those with our existing 1-year Bonds which are about to mature – this new opportunity to save.” He emphasized NS&I’s commitment to balancing the interests of savers, taxpayers, and the financial services sector while striving to meet its annual net financing target.

Comparing NS&I’s Rates to Competitors

While the new rates may attract some interest, they still fall short when compared to the best one-year fixed savings accounts currently available in the market. According to Laura Suter, director of personal finance at AJ Bell, savers should be cautious about overestimating the appeal of these increases. She noted that while the new rates are closer to the top tier of savings accounts, they remain “nowhere near leading the pack.”

For instance, customers can secure a rate of up to 4.6% with the top fixed-term savings account offered by AlRayan Bank, which requires a minimum deposit of £10,000 and allows a maximum investment of £85,000. Interest is paid upon maturity. Following closely is the second-best offering from Conister Bank, providing a competitive 4.53% interest rate with a minimum opening deposit of £5,000.

For those looking to invest their savings over a longer timeframe, the market leader for two-year fixed rate bonds is Castle Community Bank, which offers 4.38% on deposits ranging from £1,000 to £85,000. Furthermore, savers interested in easy-access accounts should consider Chase Bank, which currently offers a rate of 5% on balances up to £3,000,000, including a bonus rate of 2.17% for the first twelve months.

As consumers navigate their savings options, it is essential to compare the offerings across various financial institutions to ensure they are receiving the highest possible returns on their investments.