Money Insider: Providers battle for maturing NS&I fixed-rate balances

Towards the end of October 2009, NS&I set the cat amongst the pigeons in the savings market when it launched a range of extremely competitive fixed rate bonds. The stand-out product at the time was a one-year fixed-rate deal at 3.95 per cent, priced at a full 0.20 per cent higher than its nearest competitor.

Not surprisingly the combination of a table-topping interest rate and the 100 per cent security of funds (courtesy of HM Treasury) regardless of balance, proved an overwhelming success until the products were withdrawn just 24 days later.

This aggressive pricing stance adopted by NS&I attracted huge swathes of funds away from the banks and building societies, with the latter seeing a total of over £2bn of balances withdrawn during October and November last year. Twelve months on, these accounts with NS&I are approaching maturity and could well be the reason for the extra activity we've witnessed in the fixed-rate bond market during the past few weeks.

Much of the focus has concentrated on the shorter term products over one and two years, with a number of providers throwing their hand in and jostling for best buy positions. The latest launch from Barnsley Building Society currently heads the one-year bond table with its new Online Bond. The account can be opened from as little as £100 and even though it is only available via the internet, at 3.05 per cent gross it is the market leader in what has become a very congested and competitive field.

There are at least seven other bonds paying 3 per cent gross fixed for one year, but the extra 0.05 per cent from Barnsley is a cute marketing move to gain that all-important best buy coverage. With new products being launched on an almost daily basis, it wouldn't surprise me to see the 3.05 per cent rate surpassed during the next couple of weeks.

Bank of Cyprus UK has also re-entered the fray after a brief absence from the savings best buys and last week stormed back to the top of the pile with both its two-year and three-year fixed-rate bonds. The two-year product is fixed at 3.60 per cent gross and the three-year option at 4.15 per cent gross – both are available from just £1 and can be opened online, by phone (0845 850 5555), by post or in branch. And for those concerned about safety of their money, deposits placed with Bank of Cyprus UK are covered by the Central Bank of Cyprus Deposit Protection Scheme, which covers €100,000 or the sterling equivalent of savers' deposits.

With rates at a low ebb, aside from ISAs, fixed rate bonds still represent the best way to obtain the highest savings returns , as long as you are comfortable that you can manage without access to your cash for the duration of the term you choose. However the difference between the best three-year deal and the best five-year fixed rate deal has recently narrowed to just 0.45 per cent and is not much of an incentive for locking your cash away for an additional two years.

Product round-up

In other savings news, Lloyds TSB has just ramped up the rate on its monthly saver account from 2 per cent to 5 per cent gross. The account is only available to existing or new Lloyds TSB current account customers and is the latest in a line of moves from banks aimed to recruit and retain current account business.

The 5 per cent rate is fixed for 12 months and you need to pay in between £25 and £250 each month. You can make unlimited penalty-free withdrawals and whilst you are limited to the amount you can deposit, 5 per cent is not to be sniffed at in the current low rate savings environment.

Mortgage lenders continue to fight hard for their share of a sluggish market, as highlighted by the latest move from ING Direct with a further cut to its two-year fixed rate, now the best buy at 2.99 per cent for loans up to 75 per cent loan to value.

The arrangement and booking fees total £945, however the overall package is priced keenly enough to tempt people off their Standard Variable Rate (SVR) with competitor lenders, particularly as this mortgage comes with free legal fees and free valuation for remortgage customers.

Mortgage activity may be subdued at the moment but it's certainly not down to a lack of low-priced products, it's more down to a lack of consumer confidence in the wider economy and the uncertainty and job security concerns associated with the spending review measures.

Andrew Hagger is a money analyst at Moneynet.co.uk

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
Shoppers at Selfridges department store in central London
news

News
Jeremy Paxman has admitted he is a 'one-nation Tory' and complained that Newsnight is made by idealistic '13-year-olds' who foolishly think they can 'change the world'.
peopleFormer Newsnight presenter is being touted for a brand new role
News
Michael Buerk in the I'm A Celebrity jungle 2014
people
Voices
File: David Cameron offers a toast during a State Dinner in his honour March 14, 2012
voicesAnd nobody from Ukip said babies born to migrants should be classed as migrants, says Nigel Farage
PROMOTED VIDEO
Arts and Entertainment
Avatar grossed $2.8bn at the box office after its release in 2009
filmJames Cameron is excited
Arts and Entertainment
Stik on the crane as he completed the mural
art
News
Happy in his hat: Pharrell Williams
people
Arts and Entertainment
Stella Gibson is getting closer to catching her killer
tvReview: It's gripping edge-of-the-seat drama, so a curveball can be forgiven at such a late stage
News
Brazilian football legend Pele pictured in 2011
peopleFans had feared the worst when it was announced the Brazil legand was in a 'special care' unit
News
i100(More than you think)
Sport
Brendan Rodgers seems more stressed than ever before as Liverpool manager
FOOTBALLI like Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
News
The Magna Carta
archaeologyContemporary account of historic signing discovered
News
Phyllis Dorothy James on stage during a reading of her book 'Death Comes to Pemberley' last year
peopleJohn Walsh pays tribute to PD James, who died today
Sport
Benjamin Stambouli celebrates his goal for Tottenham last night
FOOTBALL
Life and Style
Dishing it out: the head chef in ‘Ratatouille’
food + drinkShould UK restaurants follow suit?
News
peopleExclusive: Maryum and Hana Ali share their stories of the family man behind the boxing gloves
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Argyll Scott International: Service Desk Analyst

    £20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...

    Argyll Scott International: 2x Service Desk Analyst

    £20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...

    Recruitment Genius: Senior Execution Trader

    £30000 - £250000 per annum: Recruitment Genius: A global Rolling Spot FX, Comm...

    Citifocus Ltd: ACA - Financial Reporting

    £Attractive Package: Citifocus Ltd: Chartered accountant (ACA or CPA), must be...

    Day In a Page

    Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

    Christmas Appeal

    Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
    Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

    Is it always right to try to prolong life?

    Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
    Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

    What does it take for women to get to the top?

    Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
    Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

    Knitting pretty: British Christmas Jumpers

    Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
    French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

    French chefs campaign against bullying

    A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
    Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

    Just what you need on a New Year hangover...

    Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
    Cuba set to stage its first US musical in 50 years

    Cuba to stage first US musical in 50 years

    Claire Allfree finds out if the new production of Rent will hit the right note in Havana
    Christmas 2014: 10 best educational toys

    Learn and play: 10 best educational toys

    Of course you want them to have fun, but even better if they can learn at the same time
    Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

    Paul Scholes column

    I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
    Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

    Lewis Moody: Lancaster has made all the right calls – now England must deliver

    So what must the red-rose do differently? They have to take the points on offer 
    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
    Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

    Sol Campbell cries foul at Labour's mansion tax

    The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
    Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

    Sarkozy returns

    The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
    Is the criticism of Ed Miliband a coded form of anti-Semitism?

    Is the criticism of Miliband anti-Semitic?

    Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
    Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

    Ouija boards are the must-have festive gift

    Simon Usborne explores the appeal - and mysteries - of a century-old parlour game