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of funds (courtesy of HM Treasury) regardless of balance, proved an overwhelming success until the products were withdrawn just 24 days later.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swathes of funds away from the banks and building societies, with the latter seeing a total of over £2bn of balances withdrawn during October and November last year.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
people'It can last and it's terrifying'
Sport
Danny Welbeck's Manchester United future is in doubt
footballGunners confirm signing from Manchester United
Sport
footballStriker has moved on loan for the remainder of the season
Sport
footballFeaturing Bart Simpson
PROMOTED VIDEO
New Articles
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
News
The five geckos were launched into space to find out about the effects of weightlessness on the creatures’ sex lives
i100
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Arts and Entertainment
Hare’s a riddle: Kit Williams with the treasure linked to Masquerade
booksRiddling trilogy could net you $3m
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
News
i100
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Arts and Entertainment
Word master: Self holds up a copy of his novel ‘Umbrella’
booksUnlike 'talented mediocrity' George Orwell, you must approach this writer dictionary in hand
News
i100
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

    SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

    £40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

    Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

    £85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

    Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

    £40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

    SQL DBA/Developer

    £500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

    Day In a Page

    'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

    'I’ll tell you what I would not serve - lamb and potatoes'

    US ambassador hits out at stodgy British food
    Radio Times female powerlist: A 'revolution' in TV gender roles

    A 'revolution' in TV gender roles

    Inside the Radio Times female powerlist
    Endgame: James Frey's literary treasure hunt

    James Frey's literary treasure hunt

    Riddling trilogy could net you $3m
    Fitbit: Because the tingle feels so good

    Fitbit: Because the tingle feels so good

    What David Sedaris learnt about the world from his fitness tracker
    Saudis risk new Muslim division with proposal to move Mohamed’s tomb

    Saudis risk new Muslim division with proposal to move Mohamed’s tomb

    Second-holiest site in Islam attracts millions of pilgrims each year
    Alexander Fury: The designer names to look for at fashion week this season

    The big names to look for this fashion week

    This week, designers begin to show their spring 2015 collections in New York
    Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

    'I like Orwell's writing as much as the next talented mediocrity'

    Will Self takes aim at Orwell's rules for writing plain English
    Meet Afghanistan's middle-class paint-ballers

    Meet Afghanistan's middle-class paint-ballers

    Toy guns proving a popular diversion in a country flooded with the real thing
    Al Pacino wows Venice

    Al Pacino wows Venice

    Ham among the brilliance as actor premieres two films at festival
    Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

    Neil Lawson Baker interview

    ‘I’ve gained so much from art. It’s only right to give something back’.
    The other Mugabe who is lining up for the Zimbabwean presidency

    The other Mugabe who is lining up for the Zimbabwean presidency

    Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
    The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

    The model for a gadget launch

    Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
    Alice Roberts: She's done pretty well, for a boffin without a beard

    She's done pretty well, for a boffin without a beard

    Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
    Get well soon, Joan Rivers - an inspiration, whether she likes it or not

    Get well soon, Joan Rivers

    She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
    Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

    A fresh take on an old foe

    Doctor Who Into the Dalek more than compensated for last week's nonsensical offering