Help Me To Save For A House Please

mr_fishbulb

Hi All,

I'm looking for some advice. My girlfriend and I are looking to save up for a deposit on a house. We're basically allowing 18-24 months to get a hefty deposit as we are both living with our parents (and by that I mean our respective parents - we're not incestuous siblings).

Anyway we’ve got just over £1000 each in premium bonds, £1250 each in online savings accounts (not sure how good the interest is) and around £500 each in current accounts.

We’re on between £20,000 and £24,000 each yearly income and I need some advice on how to maximise our saving.

My plan at the moment is to open cash ISAs each as soon as possible and move our premium bond money and online savings money into them to get both ours up to £3000 before the new tax year. Then from April we put our money into the ISAs again until we’ve got up to our £3000 limits for that year and then look around are the Instant Access Savings accounts and start putting into one of them each.

I’m also going to hunt around for a better current account because although I don’t plan to keep a lot in there, it should be earning the most it can.

Are there any other tips you can give us for saving for up to 2 years?

Many thanks

grumbler

Welcome to MSE!

mr_fishbulb wrote:

Are there any other tips you can give us for saving for up to 2 years?

Regularly Beat the Best Savings Accounts
Alliance & Leicester offers 10% savings on top of current account during November! (offer was extended)
With Halifax you have 7%*0.8=5.4% net (after tax) on £250 p.m. - more then with ISA. With A&L - 10%*0.8=8%. Together you can save up to £1000 p.m. in this way. When accounts mature in 12 monts move 2*£3000 into ISAs.

Regarding A&L read also Bag £100s in free cash from current accounts - you can have £150 only for opening two accounts. PM me if you don't have anybody to recommend first of you.

tomstickland

I'm in a similar position and here's my advice:

Open an A&L current account that pays 5% AER on all positive balances.
Open an A&L reg saver and put the max £250 per month into this from the A&L account. The reg saver pays 10% and the current account pays 5%, so the £3K in the reg saver at the end of the year will have had an effective rate of somewhere near 7.5%.
Mini cash ISA at 5%. £3K in each one (his and hers).
Top savings accounts pay 4.7-5.1% AER. I've got an Icici HiSave at 5.1% or thereabouts.
Use 0% credit card balance transfer to stooze money.

grumbler

tomstickland wrote:

...The reg saver pays 10% and the current account pays 5%, so the £3K in the reg saver at the end of the year will have had an effective rate of somewhere near 7.5%.

This has nothing to do with the OP's situation. This solution is good if you have a lump sum £3000 and don't have any regular income to save more.
If you have a lump sum and can save £250 every month (£500 for two accounts), the best solution is to put the available lump sum 2*(1000+1250+500) into ISAs (not to current/saving account!) stright away, then put 2*£250 p.m. into two regular saving accounts.

tomstickland

Yes, ISAs first and then reg saver. It's not true to say that it has "nothing to do" with their situation. If they open the ISAs and then start accumulating savings at a greater rate than £250 per month each, they should put these into a 5% paying account and pay the max £250 per month into the 10% saver. It's not quite as good as starting with £3K in the 5% account, but the same method applies.

grumbler

tomstickland wrote:

Yes, ISAs first and then reg saver. It's not true to say that it has "nothing to do" with their situation. If they ... start accumulating savings at a greater rate than £250 per month each, they should put these into a 5% paying account and pay the max £250 per month into the 10% saver.

Almost agree, but:
1. £250 p.m. into A&L 10%
2. £250 p.m. into Halifax 7% regular saver
3. Anything left into A&L 5% current account or other saving account.

tomstickland

That's an idea, I need to get myself a Halifax account, I'd not thought about that in my excitement over the 10% rate.

mr_fishbulb

Thanks for the replies. I'm a little confused about these regular savings accounts.

If I put £250 in the first month, then over the year it will get 10% interest.
Then I put £250 in the second month, then over the year that will get (11/12)*10% interest.
Then then next month, the £250 put that will get (10/12)*10% and so on.....

Working that out, over 1 year I would get more interest than just putting £250 every month into an instant access savings account.

But the second year the money in the Regular savings account gets booted out into an instant access savings and you start again, so that way you get close to the same intest as having just a instant access savings account for the full 2 years (also paying £250 in a month). Becasue at the end of the second year in the instant access account the very first £250 I put in would now have (24/12)*5.15%, and the second £250 would have (23/12)*5.15%

Then if you start again for a third year with the regular savings acount, you will end up with less than with an instant access savings.

mr_fishbulb

Also The Alliance And Leicester has a 5% current account (fixed until 2007)

Is there any point getting an instant access savings account when a current account pays 5%?

grumbler

mr_fishbulb wrote:

...If I put £250 in the first month, then over the year it will get 10% interest.
Then I put £250 in the second month, then over the year that will get (11/12)*10% interest.
Then then next month, the £250 put that will get (10/12)*10% and so on.....

Working that out, over 1 year I would get more interest than just putting £250 every month into an instant access savings account.

But the second year the money in the Regular savings account gets booted out into an instant access savings and you start again, so that way you get close to the same intest as having just a instant access savings account for the full 2 years (also paying £250 in a month). Becasue at the end of the second year in the instant access account the very first £250 I put in would now have (24/12)*5.15%, and the second £250 would have (23/12)*5.15%

Then if you start again for a third year with the regular savings acount, you will end up with less than with an instant access savings.

:mad:
This is absolutely wrong!
Forget about second and third years. Diring the first year you get more interest with regular saver - without any doubts. With 10% regular saver and £250 p.m. you get about £162 gross; with 5.15% instant access and the same £250 p.m. you get just about £83 gross. Obviously it is better to use regular saver to save up to £3000 during a year. The same applies to the next year and next £3000 after the first £3000 (+ interest) were moved to some other saving account or ISA ...

grumbler

mr_fishbulb wrote:

Also The Alliance And Leicester has a 5% current account (fixed until 2007) ... Is there any point getting an instant access savings account when a current account pays 5%?

Current account pays 5% only on balance up to £2500 AFAIK ...