Will NS&I savings rates continue to rise?
As the NS&I hit the headlines for all the right reasons today, with a doubling of interest received on ISA deposits from 1.2% to 2.5%, there are hopes that a technical situation could see the group continued to push savings rates higher in the UK. The government backed operation has a target for 2009/10 of zero net financing which effectively means it has to bring in as much money as it pays out. So where do we stand at this moment in time?
As we move into the latter part of 2009 there has been a net £3.2 billion inflow of funds in the first quarter of 2009 although this will have to be increased to match the £14 billion annual deposit required to balance the books. As a consequence, many analysts believe that the NS&I will be forced to push savings rates yet higher to attract more custom which should ultimately see other players in the savings market follow suit.
While it is possible that the NS&I could move to the top of the best buy league in the short to medium term this should only be a short-term situation until the books are balanced. However, anything which injects further competition into the UK savings sector would be a godsend for UK savers who have suffered more than most over the last two years.
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