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Northern Rock: New fixed rate bond at 3.5%

Northern Rock is stepping out from government protection with new savings bonds and ISAs.

Northern Rock is launching a new fixed-rate savings bond offering up to 3.5%

The bank will lose its 100% government savings guarantee on 24 May and so is now able to launch more competitive savings deals.

A one-year bond at 3.15% is hitting the market and Northern Rock’s two-year bond offers 3.5%.

Deposits between £1 and £2m are allowed, and an account can be opened by post or through branches.

Northern Rock is also launching three-year and five-year stepped rate bonds.

The rates on the bonds start at 3.5% and rise each year by 0.5% to 4.5% in the third year or 5.5% in the fifth year.

The stepped rate bonds are also available as ISAs at the same rates.

Northern Rock’s one-year fixed rate ISA offers 2.75%.

Chris Eagle, commercial manager at Creditchoices.co.uk, said: “These new bonds will not be covered by Northern Rock’s 100% guarantee, so protection under the Financial Services Compensation Scheme stands at £50,000 for single, or £100,000 for joint accounts.

“The loss of the guarantee means Northern Rock is freer to be more competitive, as the protection was considered as giving the nationalised bank an unfair advantage in the market. With a freer rein, it could worth keeping an eye on the Rock for tasty deals.