Savers taking out the one-year Guaranteed Growth Bonds or Guaranteed Income Bonds (minimum £500) will earn 5% gross from today.

The rate has increased from 4% and 3.90% respectively.

If you already hold a one-year growth or income bond, you’ll continue to earn the original fixed rate until the end of the term.

Meanwhile, customers already holding two-year and three-year growth or income bonds will also be able to roll onto a new deal paying 5.10% gross.

These two- and three-year bonds aren’t on sale anymore but NS&I confirms they are available to existing customers who reach the end of their current fixed-term.

Here, the rates have increased from 4.2% and 4.1% respectively.

It comes just a couple of weeks after NS&I announced it would raise the Premium Bonds rate from 3.70% to 4% from the August 2023 prize draw – its highest level since 2007.

The odds on each bond winning a prize will improve to 22,000 to one from 24,000 to one, meaning that each £1 bond will have its best chance of winning a prize in almost 15 years.

NS&I estimates that the changes will see an extra £30m added to the prize fund from August, with an estimated 460,000 extra prizes up for grabs.

Meanwhile, from today, Direct Saver and Income Bonds holders will see the return on their savings boosted to 3.40% from 2.85%.

How good are the rate rises?

Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The NS&I is on a roll when it comes to upping savings rates – a move that could keep competition alive in the rest of the market.

“The interest rates paid on the NS&I’s Guaranteed Growth Bonds and Guaranteed Income Bonds are much better than the equivalent savings products offered by high street banks, but savers can still get better deals by shopping around.”

Jobson added that despite increases, the ravaging effect of inflation means the price of goods and services are increasing faster than the interest you earn on your savings.

“This mismatch between the growth of your savings and the soaring prices means that, in real terms, you’re losing ground. “Those who can afford to put money away for five years or more should consider investing for the potential of long-term inflation-beating returns that far outstrip savings rates,” he said.

Dax Harkins, NS&I chief executive, said: “Guaranteed Growth Bonds and Guaranteed Income Bonds are popular with our customers and I’m pleased that we’re able to announce these changes today for new and existing customers to take advantage of.

“Customers holding Direct Saver and Income Bonds will also see a boost from today, with their interest rates going up, and millions of Premium Bonds holders will also have a better chance of winning a prize from the next draw.”