NS&I will cut rates on some of its variable products from next month and the Premium Bonds prize fund rate from the April draw.

From 5 March, the interest rate for Direct Saver will fall from 3.5% to 3.3% gross/AER and Income Bonds drop from 3.44% to 3.26% gross/3.3% AER.
 

The Premium Bonds prize fund rate will fall from 4% to 3.8% from the April draw, with the odds remaining at 22,000 to 1.

In more positive news, NS&I has increased the interest rate paid on its Direct ISA from 3% to 3.5% gross/AER from today to attract savers considering their ISA options before the 5 April deadline.

Andrew Westhead, NS&I retail director, said: “At a time when many savers are reviewing their ISA plans, I’m glad we have been able to increase our Direct ISA interest rate.

He said the business regularly reviews its products to ensure they reflect current market conditions. “The changes we are making to Premium Bonds, Direct Saver and Income Bonds rates enable us to continue to balance the interests of savers, taxpayers and the stability of the broader financial services sector.”

He said that even with the fall to the Premium Bonds prize fund rate, NS&I expects more than 5.9 million tax-free prizes worth more than £411m to be won in the April draw.”
 


Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “NS&I is testing the loyalty of its Premium Bond holders by slashing the prize rate to 3.8%. It was bound to happen, because the easy access savings market has been inching south ever since this month’s Bank of England rate cut, and NS&I will be keen not to pay more than it has to."

She said NS&I is throwing its weight behind its cash ISA to make the most of what’s likely to be a busy cash ISA season. She said: "While it’s hardly jostling for position at the top of the table, the fact it has boosted this rate at a time when it’s cutting others demonstrates the real strength in the ISA market right now. The rates on the most competitive easy access ISAs are now higher than their savings account equivalents, with a number offering more than 5%.”