What and where to invest £20,000 house deposit

blondends wrote: »

I am looking for the best returns possible.

Well, the best returns possible involves the highest risk. So it depends on your aversion to risk, which you haven't stated.

If you want your £20,000 back guaranteed, then start here:
http://www.moneysavingexpert.com/savings/savings-accounts-best-interest.
However these are by no means the "best returns possible".

If you are prepared to get back less than your initial investment in the hopes of higher gains, then please explain to us exactly how much risk you're willing to take.

If, like your post says, you want the "best returns possible", then my advice is the National Lottery, or alternatively Premium Bonds where you have the chance to win £1,000,000 without risking any of your initial investment.

You're looking at this the wrong way. There are two factors involved in a house deposit. First, access - you don't know when the market bottom is, and more importantly you don't know when you'll find hthe house you actually want to buy. Instant access with no restrictions is essential.

Second, relative values. House prices are depreciating at something like a percentage point or two per month. Therefore if you put your deposit in a bank account that pays 0% interest, the proportion of deposit to house price is still increasing.

So, don't get caught in the "Lock it in for best returns" trap. All you need is an account with a "safe" institution that gives you instant access for 1% or 2% of interest.

I got out of the housing market in 2007, before prices started crashing. Now I have my house deposit in a Natwest eSavings account, paying 3%-ish. I'm totally happy with that because I've got instant access and a good relative return to the asset I'm looking to buy (3% interest and a 2% price drop).

Lock it in and you'll be crying if you can't get it out when you need it. True, you might lock it for a year and prices may not stabilise until 2011, but I'd rather not run the risk. Remember - just as important as house prices is finding a house you actually want to buy.

Blah99 wrote: »

You're looking at this the wrong way. There are two factors involved in a house deposit. First, access - you don't know when the market bottom is, and more importantly you don't know when you'll find hthe house you actually want to buy. Instant access with no restrictions is essential.

Second, relative values. House prices are depreciating at something like a percentage point or two per month. Therefore if you put your deposit in a bank account that pays 0% interest, the proportion of deposit to house price is still increasing.

So, don't get caught in the "Lock it in for best returns" trap. All you need is an account with a "safe" institution that gives you instant access for 1% or 2% of interest.

I got out of the housing market in 2007, before prices started crashing. Now I have my house deposit in a Natwest eSavings account, paying 3%-ish. I'm totally happy with that because I've got instant access and a good relative return to the asset I'm looking to buy (3% interest and a 2% price drop).

Lock it in and you'll be crying if you can't get it out when you need it. True, you might lock it for a year and prices may not stabilise until 2011, but I'd rather not run the risk. Remember - just as important as house prices is finding a house you actually want to buy.

I agree that in this case it is essential to have an instant access account, but I think its still worth getting the best possible rate for an instant access account. A 1% difference in interest over 12 months would be about £200 (not considering tax). Egg offer 3.51% for an instant access savings account to new customers. Say you kept the money in the account for 12 months you'd make in interest £700. if you didnt use it for 24 months it would be over £1,400. I think it makes sense to take advantage of the £20,000 capital to its full whilst still taking advantage of instant access and no risk to your capital. I would also switch accounts to be the best paying rates as time progresses so long as you maintain instant access.