I fear the writing is on the wall for another cut to the Premium Bond prize rate – likely as soon as October.
Other rates from National Savings & Investments (NS&I) are also in line for the chop. It announced yesterday that it has raised £2.5 billion from us between April and June – the first quarter of its financial year.
At that rate, it is on course to hit £10 billion for the year, which is within its target of £12 billion with leeway of £4 billion each side.
But inflows are likely to surge, leaving NS&I at risk of overshooting its target unless it acts.
Since the cut in the Bank of England base rate earlier this month from 4.25 per cent to 4 per cent, most banks and building societies have cut their rates – making NS&I’s products look increasingly generous.
Rates on NS&I accounts including its Premium Bonds, Direct Saver, Income Bonds and Direct Isa[1] have so far remained steadfast.
Attractive: Since the cut in the Bank of England base rate earlier this month, most banks and building societies have cut their rates – making NS&I’s products look increasingly generous
It won’t want to risk distorting the market by hoovering up savings and leaving banks and building societies short of money to lend.
To me that spells a rate cut soon. The current 3.6 per cent Premium Bond prize rate looks attractive when compared to other easy-access accounts, which now pay just 2.63 per cent on average, according to Moneyfacts.
A cut would be the fourth this year, down from 4.15 per cent in January.
Even the once top-paying Marcus account is down to 3.75 per cent, while Atom’s Instant Saver Reward has fallen to 4 per cent (if you make no withdrawals).
NS&I’s east-access Direct Saver and Income Bonds also pay more than average at 3.3 per cent, while its Direct Isa pays 3.5 per cent against the average of 2.86 per cent.
If you hold Premium Bonds, I’d be tempted to enjoy the current rate before it falls. You can then decide whether to switch.
I know a lot of holders keep theirs for reasons beyond the prize rate, such as the chance of winning big.
So you’ll need to consider your own circumstances as well as the rates on offer.