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NS&I index linked accounts diminishing balances

NS&I index linked accounts diminishing balances

Category: Savings

Updated: 29/06/2011
First Published: 29/06/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

National Savings & Investment's (NS&I) inflation linked certificates are attracting funds away from other institutions, the director general of the Building Societies Association (BSA) has said.

The comments from Adrian Coles came after figures showed that savings balances held with mutuals fell by £418 million in May 2011, compared with a reduction of £373 million in May 2010.

"Following a strong April inflow, savings balances at mutuals fell in May, in common with other private sector deposit-takers," said Mr Coles.

"It seems likely that NS&I's index-linked products attracted much of the money deposited in this period."

The accounts were reintroduced in May and have proved popular with savers looking to shelter their funds from the effects of inflation.

The certificates are linked to Retail Prices Index inflation, which currently stands at 5.2%.

The last batch of NS&I index-linked savings certificates were withdrawn in July 2010, after sales of the products exceeded expectations.

The accounts have a subscription limit to guard against too much money being taken from the UK 's other banks and building societies, but it appears that some are already feeling the pinch.

There was better news on the mortgage front for mutuals, with figures showing lending totalled £1.8 billion in May 2011, up 20% compared to the £1.5 billion in May 2010.

Mortgage approvals by mutuals, also £1.8 billion, were up by 15% compared to the £1.6 billion approved in May last year.

"Both gross lending and approvals by mutuals have been stronger in the first five months of 2011 compared to the same period last year," said Mr Coles.

"Although activity in the market is still considerably weaker than pre-crunch levels, mutuals have been increasing their mortgage lending and offering competitive products."

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