Government Now Paying Higher Interest Rates On Income Bonds

[loginandtonic]

From their email to me:

NS&I – interest rate changes

Thank you for registering to receive updates from National Savings and Investments

We announced new interest rates on 20 May 2009 for NS&I Income Bonds. The rates have been increased by 1% for all Income Bonds customers, with effect from 20 May 2009.

You can see the current rates on our interest rates page. http://www.nsandi.com/interest-rates/index.jsp?ccd=NMJXAA

Someone please tell me I'm not dreaming. I'm feeling faint just reading that. Seriously.

[Moo]

You've got to wonder why they're doing this, as on the face of it it would seem that they're competing against two flavours of institution that could really do with a few more savers at the moment - the nationalised banks, and the building societies.

[Little Professor]

Annual rate 1.7 - 2.0%. Taxable.

No thanks.

[Game_Over]

I have been going on about this for days.

Interest rates on Building Society 1 and 2 year bonds have been rising steadily in the last few weeks

You can now get 4.25% which makes BOE base rate of 0.5% irrelevant because mortgage interest rates have got to be related to what Building Societies are having to pay savers.

I currently have a 2 year bond with the Britannia paying 6.7%

When it runs out next year I expect to be offered over 5%

If the trend of the last few weeks continues I might even get more than 6.7%

IMO the government is in a real bind, it needs to borrow large amounts of money, but low interest rates are resulting in capital leaving the UK so they are going to end up competing with banks and buildings societies for a dwindling amount of capital.

I am not an 'expert' - these are just my opinions.

[Bloo Loo]

all sub-prime borrowers pay a higher rate due to risk premium.

[Authoritarian]

all sub-prime borrowers pay a higher rate due to risk premium.

[interestrateripoff]

all sub-prime borrowers pay a higher rate due to risk premium.

But we've got Gordon Brown in charge and he saved the world.

Something is very very wrong.

[Bloo Loo]

But we've got Gordon Brown in charge and he saved the world.

Something is very very wrong.

indeed, your first sentence is wrong in every word.

[Yoss]

all sub-prime borrowers pay a higher rate due to risk premium.

Don't forget!

Even prime borrowers now pay a huge premium over base rate because the nationalised banks need re-capitalising, once that job is done...Inflation targeting + VAT will creep/jump back up.

Base rates are at historical lows, but the risk premium is well above where it was, when rates rise, some peeps (Those that forgot the 12% base rates in the last HPC) may be in for a nasty shock as that now equates to a repayment rate of 15+%

That was back when 3.5x salary single or 2.5x salary joint + 10% deposit + Repayment plan was the industry norm!

Very few loans will meet that criteria today, so the bottom (even if underpinned by a "It's cheap now frenzy") has not yet been reached.

[loginandtonic]

I was just gonna post & ask WHY up 1% suddenly? Why so kind to us? [shrugs shoulders]

[grey shark]

I was just gonna post & ask WHY up 1% suddenly? Why so kind to us?

They need the money honey ........

[loginandtonic]

They need the money honey ........

but the govt just printy printy whatever they want now, dont tell me they've had a pang of conscience and refused to print enough to satisfy 'demand', cant believe it, Merv just keeps pressing the green copy button on the colour laser and out come crispy notes complete with hologram or electronically created, so why the need for pre-existing 'm4' old money or whatever it's called - i just dont get it but then again i was never good at Gordonomics

[pathfinder]

I got motivated enough to pull out my small £500 gamble on premium bonds. Pehaps someone has looked at deposit numbers.

Was also nagged about applying of their ISA product. At 1.3% she must of thought I was a mug, well i did have premium bonds so it was quite right to assume.

[DrGUID]

It's all well and good spending our money on gurkhas and things but at the end of the day a government that spends more than it earns is going to have to pay much higher interest rates.

Seeing 10-20% interest rates in a few years (or even a few months) is not an unreasonable assumption .

[livingdangerously]

Interesting move this. It smacks of panic. There's no rhyme or reason for NS&I to raise interest rates on income bonds when the base rate hasn't moved. It could cause a big outflow of funds from especially building societies who really need the cash at the moment. If I had savings I would prefer to put them on instant access with NS&I at 2 per cent than tie into bonds with BSs at double the rate in the present circumstances.

[petrodollar]

Interesting move this. It smacks of panic. There's no rhyme or reason for NS&I to raise interest rates on income bonds when the base rate hasn't moved. It could cause a big outflow of funds from especially building societies who really need the cash at the moment. If I had savings I would prefer to put them on instant access with NS&I at 2 per cent than tie into bonds with BSs at double the rate in the present circumstances.

Agreed real money in short supply perhaps and god knows the gov have spent plenty.

I can only see the rates having to rise more as demand for real money rises.

Interessting fact in March there were only 3 financial products offering 4% or more for 2-3 year fix rates.

As of this morning I counted 79 products thats a 2500% increase in demand for savings peoples (real money) in two and a half months.

I can only see the demand and hence the rates for cash increasing, while fixing must be done with care.

But I must admit you can get 4% no problem on a 2 year fix aka halifax g reserve which makes the 2% at nsi a bit poor.

the tide has turned.

[DrGUID]

Yes money is in short supply - I've noticed my income is drying up and that's after the largest fiscal stimulus in history.

Where did all that money go? Now is not a good time to have debts - it's going to be increasingly difficult to find the cash to pay them off.

[petrodollar]

Yes money is in short supply - I've noticed my income is drying up and that's after the largest fiscal stimulus in history.

Where did all that money go? Now is not a good time to have debts - it's going to be increasingly difficult to find the cash to pay them off.

I think the money went up the political and banking sphincter.

Regards income we have a few issues with real inflation as apposed to the offical view imposed upon us, which may be a cause for concern if you have significent funds in index linked funds as I do.

This party is far from over house prices are now a side show the real issues are somewhat more serious and may yet cause the billions of banknotes rammed up the worlds financial anus to dislodge and cover the human race in a multi trillion pile of steaming sh1te.