Premium Bond rates

justwantedtosay

With the cost of government borrowing leaping up and building society returns now being much better than PBs, so presumably a lot of people are dumping their PBs, is it reasonable to expect NS&I to raise the PB return significantly soon as it's a cheap way for the government to borrow - and it looks as if they plan to borrow a lot! They're a lousy 'investment' at 1.4% now but were pretty good a year ago, compared with easy access savings, when they paid 1%. Is it wildly optimistic to expect a 1%+ rise for the November draw?.

400ixl

Thread on the topic already at https://forums.moneysavingexpert.com/discussion/6381319/when-will-ns-i-increase-premium-bond-prize-fund-rate

El_Torro

I’d be surprised if we got an increase this year, maybe early next year. That’s just a guess though.

Historically Premium Bonds have had lower rates than competitive savings accounts. It just depends on what NS&I’s target is and how aggressive they want to be in achieving that target.

Albermarle

On the other hand borrowing costs for the government have risen sharply, so maybe not a good idea to see a lot of PB holders jumping ship.

eskbanker

In the past year, there have been seven BoE rate rises and just one PB prize rate increase - obviously too early to judge the impact of last week's base rate rise, but perhaps worth noting that the number of bonds held has increased every month over that 12-month period, so there's certainly no evidence yet of "a lot of PB holders jumping ship" even though PBs have fallen even further adrift of comparable easy access savings....

September 2021: 112.4bn bonds in draw
September 2022: 119.1bn bonds in draw

justwantedtosay

eskbanker said:

In the past year, there have been seven BoE rate rises and just one PB prize rate increase - obviously too early to judge the impact of last week's base rate rise, but perhaps worth noting that the number of bonds held has increased every month over that 12-month period, so there's certainly no evidence yet of "a lot of PB holders jumping ship" even though PBs have fallen even further adrift of comparable easy access savings....

September 2021: 112.4bn bonds in draw
September 2022: 119.1bn bonds in draw

It's only in the last few months that savings rates have gone up so I wouldn't be surprised if a lot of PBs were bought at the start of the year when they offered a good return compared to an easy access account, that's when I bought more. There's been a lot of advice to sell them recently as you can get nearly twice the return in a building society.

Albermarle

There's been a lot of advice to sell them recently as you can get nearly twice the return in a building society.

Not just building societies, many smaller banks offer even better rates.

However PB's are popular due to the prize draw element and the majority of savers do not shop around/are blissfully unaware that they have become uncompetitive.

eskbanker

justwantedtosay said:

eskbanker said:

In the past year, there have been seven BoE rate rises and just one PB prize rate increase - obviously too early to judge the impact of last week's base rate rise, but perhaps worth noting that the number of bonds held has increased every month over that 12-month period, so there's certainly no evidence yet of "a lot of PB holders jumping ship" even though PBs have fallen even further adrift of comparable easy access savings....

September 2021: 112.4bn bonds in draw
September 2022: 119.1bn bonds in draw

It's only in the last few months that savings rates have gone up so I wouldn't be surprised if a lot of PBs were bought at the start of the year when they offered a good return compared to an easy access account, that's when I bought more. There's been a lot of advice to sell them recently as you can get nearly twice the return in a building society.

As stated, "the number of bonds held has increased every month over that 12-month period", even though I only posted the September ones, so there are more bonds active in September 2022 than there were in August 2022, which was higher than July 2022, and so on, i.e. the net movements every month are positive.  But yes, we don't know the future, I was just pointing out that the present and recent past don't support the narrative that there's a rush to ditch PBs - as @Albermarle says, this is likely to reflect widespread inertia rather than sophisticated market analysis!

justwantedtosay

eskbanker said:

As stated, "the number of bonds held has increased every month over that 12-month period", 

Yes, I did understand, but I very much doubt the number will increase as rapidly now, and would be surprised if the monthly gains haven't already started to fall. A lot of people on the thread I was pointed to are saying they will sell and the pundits are saying interest rates will hit 5% soon, so you'd be daft to buy PBs at 1.4%. The real drama I was referring to only happened over the last few days so won't be reflected in sales yet. The bonds in the September 2022 draw were bought before the end of July - the world was a different place back then.

southone

From,

Paul Lewis

@paullewismoney

·

42m

Premium bond odds improved and interest rate raised to 2.2% to boost prize fund with more bigger prizes. More detail later.

ColdIron

https://www.thisismoney.co.uk/money/saving/article-11253877/NS-boosts-rates-Premium-Bonds-100k-50k-prizes-grabs.html