NSI Savings Bonds Slashed

Good news for borrowers but not so good for savers.

The National Savings and Investments has slashed its three-year savings bonds by a huge 1.75% in one go, taking it down from 5.7% to 3.95%. I believe it’s the first time that National Savings Investments have been lower than the base rate, let alone so much lower. This can only be a very positive barometer of where we are in the mortgage rates and interest rates market at the moment. If you’ve been watching the fixed rates being offered by lenders over the last few weeks, you’ll notice that just about every day, one lender or another is offering a slightly lower rate because the take-up of mortgages has literally collapsed over the last few months.

This has only accelerated since the latest inflation figures were released. And although things are not always as they seem, it is very positive, officially appearing to be lower than the Prime Minister’s target. And I do say appearing because, as always, once again, things are not always as they seem. But regardless, inflation is heading in the right direction. And we have only just touched on the effects of 14 interest rate rises, one after another, which are slowing things down at an alarming rate.

So much so that it would not surprise me if the Bank of England, subject to what happens with inflation, which I believe will continue to fall dramatically, may be pressured to begin reducing rates in the near future to stop the economy literally crash landing to a halt. They will obviously be careful because they got it wrong last year and didn’t increase rates in time. So this time, they will be careful not to be premature with reducing rates. But you can see from lenders that they are operating a stick and carrot tactic, keeping their variable rates ridiculously high, trying to tie people into moderately high fixed rates with fees and, more often than not, significant early repayment charges to tie people into a rate that’s higher than they could possibly get in the next few months for at least two or three years, with serious penalties if they should leave. So you need to take…

(02:38) …this into account. Obviously, it all depends on your personal circumstances, but the outlook is looking very positive with regards to mortgages at the moment. Don’t be fooled that with the fall in rates for mortgages, the property market will suddenly take off. It will not. The pressure on property prices is still downwards, and for the first time, the Land Registry has acknowledged this. But you need to also keep in mind that since the pandemic and the work-from-home initiative or directive, whatever you may call it, that the efficiency of the Land Registry is nowhere near where it was. Whereas previous to that, on average, figures were published after three months; now they take as long as a year, which means that it’s much, much longer before we actually have the true figures. And in the meantime, we are at the mercy of the media with a vested interest in hiding the truth from the public to keep them overpaying, overborrowing, and to prevent the inevitable fall in prices. Anyway, on that note, it’s looking promising for mortgages, but who knows from…

(04:02) …one week to the next how things will change. That’s all for this video. Thank you very much, as always. If you have any questions, please feel free to get in touch, and I will see you next time. Bye-bye.

Summary conclusion

– **Interest Rate Reductions:** National Savings and Investments have significantly reduced three-year savings bonds by 1.75%, marking a decrease from 5.7% to 3.95%. This reduction hints at a positive trend for borrowers but poses challenges for savers.

– **Market and Economic Indicators:** The mortgage and interest rates market is experiencing a decline in uptake, especially after the release of inflation figures, suggesting a possible downturn in property prices.

– **Inflation and Rate Changes:** Despite 14 consecutive interest rate rises impacting the economy, inflation is anticipated to continue decreasing, potentially pressuring the Bank of England to reduce rates cautiously.

– **Lender Tactics:** Lenders are using strategies such as high variable rates and tying borrowers into fixed rates with penalties, aiming to maintain higher rates for longer terms despite the potential for lower rates in the near future.

– **Property Market Outlook:** While mortgage rates are decreasing, the property market is unlikely to experience a sudden surge; instead, there’s a continued downward pressure on property prices, acknowledged for the first time by the Land Registry.

– **Challenges and Media Influence:** Efficiency challenges with data publication post-pandemic, along with media influences, may misrepresent the true state of the market, potentially leading to overpaying and overborrowing.

– **Uncertain Future:** Despite the positive outlook for mortgages, the dynamic nature of economic conditions suggests that changes can occur rapidly, making it challenging to predict market shifts on a week-to-week basis.

– **Closing Remarks:** Overall, while the mortgage landscape appears optimistic, caution and awareness of personal circumstances are essential due to the uncertain economic environment and potential misinformation from media sources.