Santander First Home Saver - loophole to be able to save more?

Manual_Reversion

I've searched the forums for this but couldn't find anything so apologies if this has been done before.

The Santander First Home Saver yielding 5% looks attractive save for the fact that you're restricted to an initial deposit of £5000 followed by regular payments of up to £300.

I have the paperwork in front of me, and one of the clauses related to the regular payments states:

"If you pay in more than £300 or less than £100 in any calendar month you will receive 0.10% gross/AER (variable) one the whole balance for that month only"

"...for that month only." (my bold)

So, what's to stop a saver opening one of these accounts, paying an initial deposit of £5000, then one regular payment of, say, £35000, followed by regular payments of £300 per month. You spend one month outside the rules and are punished by the 0.1%, but for 'that month only'. You then play by the rules and put in £300 per month and receive 5% gross on the lot.

Numerical example 1: playing by the rules

Deposit £5000 followed by £300 per month
Gross end of year balance = £8939
Interest earned = £8939 - [£5000 + (12 * £300)] = £339 (gross)

Numerical example 2: bending the rules in month one
Deposit £5000 followed by £35000 in month one and then £300 per month subsequently.
Gross end of year balance = £45,513 approx*
Interest earned = £45513 - [£40000 + (11 * £300)] = £2213 (gross)

* Forgive the crudeness of the calculation, but I used 4.5% AER in order to approximate the effect of one month at 0.1%. Purists will rightly hate me.

Any thoughts?

paid4it

dont want to sound picky here but does any one saving for a first morgage have 40 grand to invest ? or have they all ready got a deposit by then? only asking

Manual_Reversion

Thanks for the reply.

Not picky at all. My wife and I STR'd in mid 2008 and have been able to save a decent amount each month since then so we're in the fortunate position of having around 40k for the next deposit. Our first mortgage was in my name so technically my wife qualifies as a FTB for Santander's purposes.

I've now come across another thread that deals with the First Home Saver offering from Santander, but deals with more general concerns. The lack of interest in this angle leads me to believe that few people have gone down this route.

I shall give it a go and report back, good or bad.

Kind regards.

hugheskevi

few people have gone down this route

It is frequently discussed.

As I recall, the terms and conditions of the account which you sign when opening it say that in the event you overfund, Santander has the right to close the account, something like that.

I've never seen a definitive report back from anyone who says that after the month in which the overpayment occured, they received interest at the higher rate in the future. Equally, I have never seen a report saying Santander closed the account after overfunding.

But I don't follow this board closely, so there may well be such reports I haven't seen.

KingEdmund

I am planning to do this offer by placing 5,000 lump sum and then a further 5,000 in the first month losing the 5% interest. An from there depositing 100 pounds a month taking advantage of a great 5% offer.

Manual_Reversion

Apologies for the delay replying.

Having opened the account with the initial £5000, my wife and I have just set up the initial standing order for £39000, the second and subsequent standing orders will be for £100 per month. This will give us approximately two years before the account balance reaches £50000 at which point the account is closed.

Our local branch staff weren't especially happy with the idea when I first raised it, but agreed with the logic. In the end we opened the account in London; the staff there seemed more savvy about the idea and were more positive.

I'm aware the other posters on other threads have mentioned about Santander's right to close the account if more than £300 was paid in any one month. Personally I haven't seen such a statement on our paperwork. To my mind the potential benefit (over £100 per month interest NET) outways the possibility of having the account closed.

After all, they wrote the rules, and we're going to play by them to the letter.

I'll update if we encounter problems, otherwise assume it has worked for us.

rb10

Manual_Reversion wrote: »

I'm aware the other posters on other threads have mentioned about Santander's right to close the account if more than £300 was paid in any one month. Personally I haven't seen such a statement on our paperwork.

From the Terms and Conditions of the account ...

Additional deposits of between £100 and £300 will need to be made each month via standing order. You may vary the amount that you deposit each month as long as it remains between £100 and £300. If you deposit more than £300 in a single month we reserve the right to close your account.