NS&I is to increase interest rates on its Direct ISA, Direct Saver and Income Bonds to 0.35% from 29 December following the recent Bank of England base rate rise.

The interest rate on Direct Saver and Income Bonds will be increased by 20 basis points, from 0.15% gross/AER to 0.35% gross/AER. 

The interest rate on the NS&I Direct ISA will be increased by 25 basis points, from 0.10% tax-free/AER to 0.35% tax-free/AER.

Last week the Bank of England increased its base rate from 0.10% to 0.25%, the first rise in rates for three years. 

The move came after CPI inflation rose to 5.1% in November - the highest level for over 10 years.

The rise in inflation has put pressure on the bank to keep inflation under control. Inflation is well above the Bank's 2% target for CPI.

NS&I’s says its Net Financing target for 2021-2022 will be £6bn and in a range of £3bn to £9bn. 

In October this year, NS&I published its year-to-date total Net Financing performance of £0.6bn. 

NS&I says the decision to increase the interest rates on the products is in order to help NS&I meet its annual Net Financing target.

Source: NS&I