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NS&I drops rates

Written by Gary Howes

Thursday, 09 October 2008

Rate cut comes as consumers signal trust in Government backed financial institutions.

The National Savings and Investments (NS&I) ISA interest rate has been lowered to 4.8% on the back of yesterdays cut in interest rates by the Bank of England.

The interest rate paid on NS&I’s Direct ISA will come down from 5.30%.

Trust in Government backing

Independent research conducted by Mintel shows that the state backed bank is the most trusted high street banking brand in the UK.

The vote of confidence has been attributed by some analysts to consumers desire for security now the financial system has come undone.

25% of those interviewed say they trust the brand above all others in the UK, this is compared to the 16% average across the leading high street banks.

"The security offered by the Government's backing is hugely attractive in today's more uncertain times. This is confirmed by the fact that NS&I has had to trim rates as too many savers have turned to them, desperate for a safe home for their money," comments Toby Clark, senior finance analyst at Mintel.

The vote in confidence for Government backed banks should signal a positive sentiment to the capitalisation rescue package announced yesterday in an unprecedented move to shore up banks.

Beyond Government backing, consumers are most likely to trust those financial institutions that pride themselves on what was, until recently, seen as a more old fashioned approach to banking.

Nationwide and Lloyds TSB make up the remaining top three most trusted brands in the finance sector, with 20% and 18% of adults trusting the companies respectively.

"Nationwide has long made a point of the fact that it is owned by its customers, not its shareholders, while Lloyds TSB is seen as being more conservative than some of its high street rivals. And in the current environment this reputation looks like it is paying off," says Clark.

One of the main justifications for Labour's emergency support package is that banks no longer trust each other enough to lend to one other. Mintel's brand research shows that this lack of trust has spread to the high street, with few consumers placing much faith in financial services organisations.

"Those banks that can persuade even a small percentage of people to trust them and so reassure them that their money is safe, are doing well," says Clark.