NS&I: Could the provider cut rates again? Britons flock to government-backed bank
NS&I’s rate cuts are worth preparing for, as having an understanding of how money saved is set to grow is important.
The Direct Saver will drop from one percent to 0.15 percent, with the Junior ISA also reducing from 3.25 percent to 1.50 percent.
The Investment Account, Income Bonds and Direct ISA will also all drop to 0.1 percent from their respective 0.80, 1.15 and 0.90 percent interest rates.
And, effective from December 2020, the Premium Bonds prize fund rate will also drop from 1.40 tax-free to one percent tax-free.
Announcing these rate cuts, Ian Ackerley, Chief Executive of NS&I, said: “Reducing interest rates is always a difficult decision. Given successive reductions in the Bank of England base rate in March, and subsequent reductions in interest rates by other providers, several of our products have become ‘best buy’ and we have experienced extremely high demand as a consequence.
“It is important that we strike a balance between the interests of savers, taxpayers and the broader financial services sector.”
Of course, as Mr Ackerley touched upon, many banks have been left reeling from the financial crisis and the decision from the Bank of England to slash its base rate to 0.1 percent.
And arguably, the shockwaves are still being felt by providers and customers alike.
However, the issue could be exacerbated further if a decision was taken to adopt negative rates – which have been speculated recently.
The measure has never been taken in the United Kingdom, but has been deployed elsewhere in the world to navigate trying financial circumstances.
Japan and Switzerland have also deployed the measure in the past as a way of boosting the economy.
However, there appears to be split opinion within the central bank on how successful such a measure could end up being in the UK.
Monetary Policy Committee members Jonathan Haskel, Silvana Tenreyo and Gertjan Vlieghe have all commented on the potential for the measure to be deployed.
Speaking independently of each other, the MPC members all stated there was promise and potential for negative rates to be implemented.
But the measure is far from promised, with the governor of the Bank of England stating it is merely “in the toolbox” with no imminent plans to use it.
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