Saving up for a new home deposit - where to put your money?

fyfestuart

Hi all,
I've been looking at the available options for saving up for buying my first house. Its all a bit confusing to me. Basically I'll be starting from scratch and saving about £500 a month for 2 years. From what I see the 5% new home saver from santander looks like a good option although theres a £300 a month limit on it, so would it be an option to split the money £300 santander and £200 into another saver account or an isa?

The interest rates seem really poor with ISA compared to regular savers but I'm not sure if theres tax to take into account (I earn ~17K per annum so pay 20% income tax)

If anyone can shed some light on all this and what my best options are would be much appreciated!!

cloudninety

Hi

I am also saving towards a deposit and have been debating where best to save the money. I agree that ISA interest rates aren't great (actually interest rates generally aren't great at the mo), but it is tax free and so the general consensus seems to be to maximise your cash ISA allowance each year before saving elsewhere.

In terms of the interest rate on the Santander account, it is pre-tax so you do have to subtract 20% (in your case) to compare the rate to the interest rates on the ISAs.

A good ISA at present seems to be the Newcastle Balance Builder at 3.4% which will let you save up to 500 pounds per month (up to a max of 5100) and if you have other ISAs from previous years (although from your post, it doesn't sound you do), you can also transfer them in.

Having said that, if you did want to contribute the max of 300 per month to the Santander account and then 200 per month to an ISA as you asked, you could certainly do this. Just bear in mind that then you would only be using 2400 of your 5100 cash ISA allowance for this tax year. (Sorry about the lack of pound signs, my keyboard annoyingly doesn't have one on it.)

Hope that helps a bit.

Would be great if interest rates would go up and house prices would come down for us FTBs finding it tough to save enough money!

cloudninety

To add: Check out the "Mini Cash ISAs: The Best ISAs currently available list" which is in the sub-board "ISAs and tax-free savings" of the Savings and Investments board.

fyfestuart

Thanks for the advice cloudninety. Seems like the higher interest rates with the non isa accounts are generally cancelled out by the tax you have to pay then

Simon11

With the Santander, you are allowed to put in more than £300 a month, you'll just get 0% interest for the month only. However putting in a few extra £k in the first month, will easily pay off in over a year!