NS&I, the UK government-backed savings body, has issued one-year fixed bonds paying interest of 6.2%, its highest rate of interest on guaranteed bonds since they were first launched in 2008.
Available from today, the new issues offered are a big markup on the previous one-year fixes, which paid 5% on Guaranteed Growth Bonds annually and 5.12% on Guaranteed Income Bonds.
Savers need a minimum investment of £500 and a maximum of £1 million in each of the new issues.
After one year, savers will have the choice to withdraw their cash or reinvest.
As it is backed by the UK Treasury, all savings with NS&I are guaranteed.
Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “NS&I has gone all in with the rates on these one-year bonds, and savers are likely to snap them up.
“For the vast majority of the time, it applies the time-honoured rule that it wants to offer something in the middle of the pack, so it attracts enough cash, but without paying over-the-odds for it, so landing a rate at the top of the pile is quite a departure.
“It reflects the fact the organisation has a fairly punchy net financing target of £7.5 billion in this financial year, at a time when people’s finances are under so much pressure that they’re spending their savings to make ends meet.”
Andrew Griffith, Economic Secretary to the Treasury, said: “It’s vital that savers are able to benefit from recent interest rate rises, so I’m delighted that NS&I is releasing new issues of Guaranteed Growth Bonds and Guaranteed Investment Bonds at over 6% – the highest rate since they were launched.”
NS&I chief executive Dax Harkins said: “Today, we are able to offer new issues with an improved interest rate for customers wanting the certainty of knowing how much they will be earning on their savings for one year.
“At the same time, existing customers with maturing bonds can choose to invest at new higher rates for two-, three- and five-year Guaranteed Growth Bonds and Guaranteed Income Bonds.”
Harkins said rates are even higher for longer-dated products such as two-year, three-year and five-year bonds, but these are only available to existing customers with maturing products rather than the one-year fixes which are open to new customers.
According to the website Moneyfactscompare.co.uk, the average one-year fixed savings rate on the market is 5.34%.
Latest Bank of England data for July showed households deposited an additional £0.4 billion with banks and building societies in July, compared to £3.8 billion of deposits in June.
This was mainly driven by net flows of £10.1 billion into interest-bearing time deposit accounts.
Net flows into ISAs saw an increase to £4.3 billion in July, from £2.9 billion in June but these inflows were mostly offset by net outflows from interest-bearing and non-interest-bearing sight accounts of £10.2 billion and £0.8 billion respectively.