Savers across the UK have been hit with a fresh blow as National Savings and Investments (NS&I) has launched new issues of its British Savings Bonds with significantly lower interest rates. The Treasury-backed provider confirmed the cuts on Tuesday, 6 January 2026, stating the adjustments reflect shifting conditions in the broader financial market.
What Are the New British Savings Bonds Rates?
The reductions apply across all fixed terms for the government-guaranteed savings products. The one-year bond rate has been trimmed from 4.20% AER to 4.07% AER. For the two-year deal, the rate falls from 4.10% to 3.98%. Savers looking at a three-year term will now see a rate of 4.02%, down from 4.16%. Finally, the five-year version drops from 4.15% to 4.05% AER.
These bonds require a minimum investment of £500, with a maximum limit of £1 million per person per issue. They are fixed-term accounts, meaning funds cannot be withdrawn early, and are available to both new customers and existing bondholders whose investments are maturing.
Why Has NS&I Made This Decision?
In its statement, NS&I said the rate cuts are a direct response to "changes in the wider market." This follows the Bank of England's decision in December to cut the base rate from 4% to 3.75%, a move that offered relief to mortgage borrowers but tightened the squeeze on savers.
NS&I operates under a unique mandate. It must meet an annual net financing target for the government, meaning money invested with it contributes to public spending. Consequently, it has a duty to balance the interests of savers, taxpayers, and the broader financial services sector. The provider stated these latest changes will help it meet its financing target while maintaining that delicate balance.
Expert Analysis and Market Context
Sarah Coles, head of personal finance at Hargreaves Lansdown, noted the swift reversal of fortunes for savers. "If you blinked, you’ll have missed higher NS&I bond rates, because just two months after they were boosted, they’ve been trimmed back again," she said.
Coles suggested the previous rate increase in November, which bucked the market trend, was likely a tactical move. "The autumn and winter tend to see more fixed-rate accounts mature... There’s every chance that this temporary boost was designed to stem the flow," she explained, pointing to a significant £2.45 billion paid into NS&I in November.
While the new rates remain above their pre-November levels, Coles highlighted that they still fall short of the most competitive fixed-rate deals available elsewhere. She attributed the resilience of the broader fixed-rate market to expectations of limited interest rate cuts during 2026.
NS&I, which holds savings for over 24 million customers, continues to offer 100% capital security on all products, backed by HM Treasury. Existing British Savings Bonds customers who have received a 30-day maturity letter will still receive the interest rate quoted in that communication.
