Customer demand forces rate cutGovernment-backed savings group lowers interest

08 October 2008

money

Today National Savings and Investments announced that it is decreasing the interest rates on some of its variable savings offers by up to 0.20%.

Jittery savers are turning their backs on high yielding savings accounts and opting for banks and institutions that are backed by government guarantees or that are perceived to be strong, prioritising the safety of their money. 

Which? Money editor Martyn Hocking said: 'Recent troubles with Icesave will further knock consumer confidence and push many  more to move their money into either Northern Rock, NS&I or one of the Irish banks with the 100% guarantee.'

In response to the increase in demand NS&I announced that it is to lower interest rates on some of its variable savings by up to 0.20%. The changes will result in the Premium Bond prize fund rate being reduced from 3.40% p.a. to 3.25% p.a. 

Last week nationalised bank Northern Rock was forced to withdraw some products for new customers after a rush of business left it in danger of breaching its competition commitments not to hold more than 1.5% of UK deposits. 

The number of people opening savings accounts with Irish banks is thought to have soared since the country's government said last week that it would guarantee 100% of deposits for two years.

Abbey, which is part of Spanish banking giant Santander, has also seen a 270% jump in savings inflows through its branches in recent weeks.

For the best available products on the market go to the Which? free advice guide for Savings and Accounts.

 

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