So far providers have been relatively slow to increase savings rates since the base rate rise but the move is likely to put more pressure on providers to increase cash savings rates.

NS&I says it will pass on the Bank of England’s interest rate rise to savers, following the decision to increase in the base rate last week from 0.25% to 0.50%.
Interest rates paid on Direct ISA, Direct Saver, Income Bonds, Investment Account and Junior ISA will increase by 25 basis points from 1 December 2017. This means, for example, that NS&I’s Direct Isa rate will increase from 0.75% to 1%.

The prize fund rate on Premium Bonds will increase by 25 basis points to 1.4% and the odds will improve from 30,000 to 1 to 24,500 to 1. The number of prizes paid out each month will increase from 2.3 million to circa 2.9 million - the highest number of prizes in any monthly Premium Bonds prize draw to date. The changes will come into effect from the December 2017 draw.

Ian Ackerley, chief executive, NS&I, said: “NS&I is pleased to be able to offer savers increased rates across our variable products. By reflecting the change in the base rate we are continuing to meet the needs of savers, whilst also balancing the interests of taxpayers and the stability of the broader financial services sector.

“For our 25 million customers, including around 21 million Premium Bonds customers, these changes will present a welcome boost. NS&I will be giving out the largest number of Premium Bond prizes every month, an estimated 2.9 million.”