NS&Igrowth bonds holding reduced

Zanderman

bowlhead99 wrote: »

It's like, if I was going to put £50k into a bank current account that offered 4.5% instant access on the entire balance, I'd jump at the chance. But then they announce they'll only pay that rate of interest on the first £500. You could say to me:"Why does it suddenly become unattractive? It's just as competitive as before. Just with a (much) lower investment limit". Mathematically you're right, that £500 would be the earning the same rate of interest it was going to be. But it only takes a fiftieth of the money I have available and is not the highest paying rate in town on that amount of money, so I'd be unlikely to even give the account a second glance. It has gone from being attractive to barely worth using, despite not changing the interest rate.

I take your point about convenience overall (but I don't need the maths spelt out!)

And yes, in your example with the limit slashed to £500, I would feel the same as you suggest.

But £500 is a whole different ballgame to a £10k deposit

If I had, say £100k that, until 2 days ago I was going to put into NS&I but they then reduced the max to £10k, I'd still put the £10k in. As it is, undeniably, still attractive for a reasonably big chunk of money.

Edited to add: as an example, my siblings and I are currently selling our mother's house to help pay for her care. We had been thinking we would use these NS&I growth bonds for the bulk of the proceeds, likely to be 500k. Now that they've slashed the max to just 10k we are disappointed.
But will we NOT use the option to put 10k in? I doubt it. We'll put 10k in at 1.95% and the rest either elsewhere or in another NS&I product,

bowlhead99

Zanderman wrote: »

But £500 is a whole different ballgame to a £10k deposit

Well, in my example it was a hundredth of the money I was trying to deploy (£50k) and in your real world example the £10k is a fiftieth of what you're trying to deploy (£500k) so doesn't exactly make a big dent in your target.

We had been thinking we would use these NS&I growth bonds for the bulk of the proceeds, likely to be 500k. Now that they've slashed the max to just 10k we are disappointed.
But will we NOT use the option to put 10k in? I doubt it. We'll put 10k in at 1.95% and the rest either elsewhere or in another NS&I product,

If you were going to put the rest of your money in another nsandi product (like the monthly income bonds that pay 1%, and perhaps some premium bonds) then fair enough, you might as well also use the growth bonds up to their reduced limit while you're there, as they do pay more than their other less-restrictive products.

However if you're going elsewhere, you would find the challenger banks with various decent rates over three years. The top three of them are doing over 2.25% for example, with others at 2% plus - and as you load them up with £80k a time, you might not reach a point where putting just £10k in a 3-yr deposit for less than 2% is attractive if you are not using a bunch of nsandi products already.

Obviously, YMMV as they say, as everyone has different circumstances.

Zanderman

bowlhead99 wrote: »

However if you're going elsewhere, you would find the challenger banks with various decent rates over three years. The top three of them are doing over 2.25% for example, with others at 2% plus - and as you load them up with £80k a time, you might not reach a point where putting just £10k in a 3-yr deposit for less than 2% is attractive if you are not using a bunch of nsandi products already.

Obviously, YMMV as they say, as everyone has different circumstances.

As you say, each to the own!
As you imply a major appeal of NS&I for a safe £500k is not just the interest rate (now lower, obv) but also the full security it offers. Obviously we can split across other banks up to £85k each, and yes, I'm well aware some of those have decent rates. I do constantly monitor these things! And indeed already use many of the challenger banks...

bowlhead99

Zanderman wrote: »

. Obviously we can split across other banks up to £85k each, and yes, I'm well aware some of those have decent rates. I do constantly monitor these things! And indeed already use many of the challenger banks...

You seem on top of it and know what you're doing so hopefully this won't come off patronising, just an observation: if you're looking at 3-year fixed accounts from the challenger banks, might be worth restricting the initial deposit to a little under £80k so your FSCS covers the compound interest building up by the end of the term. Also with the cover being per person, if you've used them yourself they can still be used again for mother (or even yourself as PoA for your mum, where supported by the bank product concerned).

I only mention as it's the sort of stuff that's obvious to some but less than obvious to others (I appreciate it's veering off topic)!