As National Savings and Investment (NS&I) cuts the rate of their most popular Direct Isa to 1.25%, savers think back to the 2008 launch rates of 5.3%.
The predicted interest rate increase promised better conditions for UK savers, but until further notice the interest rate has been frozen at 0.5%.
More Delays
In August there was talk of the interest rate increasing, with Bank of England Governor Mark Carney stating the rates could rise as high as 2% within the next 3 years. However, with rates remaining low after “Super Thursday” there is now talk from the City indicating that the first rise in UK interest rates could be delayed until autumn 2016.
Lowest of The Low
Recently, more than 400,000 savers were affected by the decreased interest rate of NS&I`s Direct Isa. With 0.25% shaved off, the rate is now 1.25%; the lowest rate since its launch in 2008.
This cut comes after NS&I received gross inflows of £32.3 billion and outflows of £15.7 billion in the 2014-15 tax-year, making it an exceptional year for NS&I. Susan Hannums, director at independent website Savings Champion, calls this move a clear attempt to stem the flow of applications after an exceptional year that has seen huge demand for their pensioner bonds and premium bonds.
Balancing Act
NS&I explains the reduced rate on their Direct Isa as a need to continually strike a balance between the needs of their savers, taxpayers and the stability of the broader financial services market.
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