Newbie needs advice on where best to put 25k

Amitoocautious

Hiya, well me and my husband have managed to save 25 k for our house deposit and though we are keeping an eye on the housing market we dont feel that its the right time to jump in just yet. The broadsheets have suddenly turned bearish and i really feel a correction will occur and we are just scared of committing ourselves to a monster mortgage for somewhere that we may be stuck in and unable to have kids in if the correction does come.

Anyway we currently have our money in a egg savings account paying around 5%. We are trying to save £1000 a month and we were easily doing this in the run up to our wedding but husband has been a bit slack though i have managed to save £500 a month still. Anyway, i am very new to savings and investments and have been told by a couple of people to put some into funds and some into mini isa's. However would it be worth putting 6 k into ISAs between us now or wait till the new tax year (despite lots of reading still confused as to when interest is paid etc). Also has anyone else got good recommendations as to where best to put the remainder of our money so that we can get some growth.

Thanks in advance

YorkshireBoy

In no particular order...

Did I read a report recently that said house prices were forecasted to rise by 15% this year - with the average property value set to top £200K?

I wouldn't invest in funds etc unless it was for the longer-term, ie 3-5 years minimum.

I'd suggest reading the savings articles in the resource bar at the top of this page. There are several options open to you, but I believe the best 'clean' savings accounts are Icesave & ICICI at 5.45%. This rate would represent a £112.50 (before tax) per annum improvement on your existing £25K savings in your Egg account.

It would make sense to use mini-cash ISA's wherever possible to shield your savings interest from tax.

Your mini-cash ISA interest is paid annually - or monthly with some account providers. Additionally, should you need to draw on your mini-cash ISA account funds for the house purchase, you can close the account and the interest earned up until that point will be paid on top of the initial deposit.

Amitoocautious

Yeah you may have read that but as many positive forecasts as there are, there are many more negative ones. Its a gamble thats for sure and if we could find something we could afford then we would probably go for it anyway as long as we can ride out any turbulent times in it.

At the end of the day our combined income is over 80k and because of when we were born we would have to get a mortgage 3 times what somebody had on that same house only around 5 years back! And if we think its a struggle in the south east then others must really be struggling now. Anyway i could be totally wrong and we wont wait years more but we want to see what happens in the next few months in terms of the market especially after reporting a seasonally adjustsed fall and slow down. Anyway that is an entirely different thing.

Thanks for the advice on the cash isa's. So if i set one up now for me and one for my husband we could get 12k into it by the end of April and would be better off than the egg account. As for the ice save one will speak to my hisband about moving the remaining money from Egg into that as any improvement is good

YorkshireBoy

Amitoocautious wrote:

So if i set one up now for me and one for my husband we could get 12k into it by the end of April...

That's what I'd do, and (as at least one of you is a higher-rate tax payer) when you see the difference in interest earned you'll regret not doing it sooner.

and would be better off than the egg account.

Considerably so.

As for the ice save one will speak to my hisband about moving the remaining money from Egg into that as any improvement is good

It's one of many accounts that may be suitable. You should investigate other options as well. If one of you is a basic rate tax payer, then consider in whose name you deposit the savings.

Graham_Devon

Set the ISA up now.

Basically you are able to invest 3k per annum in an ISA. If you do it now, you will be able to reinvest another 3k each in April.

So if you open next year and wait, you will have 6k between you earning 5.55% tax free and get the interest at the end of the year.

If you open now, in April you can invest another 6k between you and in April 2009 recieve interest on 12k instead of 6k (this is between you)

In basic terms forgetting the next 3 months, in April 2009 you would recieve between you:

6k invested = £333.00

If you invested now and stuck another 3k in each in April:

12k invested = £666

So if you wait, you lost £330 roughly.

That should help! As a normal rate tax payer, that same 12k would earn £488 in your Egg account at todays rates in 1 year.