Help, I'm saving too much money!!

hdog_3

Hi all,

I'm looking for some help as I'm in an unusual situation of being cash rich as I look to buy a flat/house in London with my girlfriend. Previously I was saving £500 a month in to my cash ISA (pays 3% interest) however last month my girlfriend and I moved back in with her parents for rent free accommodation so we can aggressively save a deposit for a place of our own. We are now both saving £1,000 every month and hope to have a £50k deposit within two years for a one/two bed flat in East London.

I think I'm being fairly savvy with my savings however wonder if anyone can suggest ways in which I can get a better return on my money.

At present from my monthly £2k net salary I save £1k by:

1. Transferring £1k to my Halifax current account - my Halifax account pays me £5 p/month for £1,000 deposits
2. From the above account I then transfer £500 to a HSBC current account - this pays 6% gross interest (for 1 year) providing I pay £500 p/month in to it, with interest paid only on deposits up to £2,500 - this is the first month I have paid in to it

So currently I have savings accumulating in my Halifax current account (£500 p/month) on not a great rate of interest but building up ready to pay in to my ISA come the new tax year.

I understand that there may be better ISA rates out there (especially if I commit to a 1 or 2 year ISA) but as I have paid my current years allowance in full I would like to know; can I open a new ISA with another provider and transfer my balance? Is this allowed?

Also once my HSBC account reaches the full £2,500 interest payable amount, what should I do with the £500 I am paying in to the account? I understand this short term should go in to my ISA but in less than 5 months I will have completed my yearly allowance, so would like to plan ahead.

Finally, my annual bonus is paid in March and think I should get (fingers crossed) £2k net after tax. What should I do with this? Pay it direct to my ISA, premium bonds? Lend on Zopa?

I really would appreciate all you shrewd savers advice as I'm keen to make my money work as hard as possible for me to get my girlfriend and mine's dream home.

If you need any more information then please feel free to send me an email.

Thanks.

jamesd

How about the First Direct regular saver that pays 8% on up to £300 a month for a year?

With a two year time horizon Zopa is probably a bad idea. There's a penalty for taking money out before a loan term ends and you can't take money from a loan out if there's been a missed payment on it. You'd probably get out less than you put in and have a lower deposit than you'd have if you left the money in a current account. The money that you can't take out doesn't go away, just pays out on the normal schedule.

qpop

I'd echo jamesd's sentiments. With a timeline of 2 years or so the difference between interest rates will have a negligible effect, particularly in comparison to the amount that you're accumulating. Once your ISA is full start filling a top-paying instant access account; 3.1% is around the best AER you'll get. You could do worse than opening a FD account ( I believe they pay £120 per new customer at the moment) and then you'll get 8% AER on the first £300 of your monthly savings.

IronWolf

I would definitely open the First Direct 8% regular saver.

Would also consider some fixed term accounts for a year or two.

I would avoid anything riskier given the short time frame.

psychic_teabag

ratesetter is a possible alternative to zopa : they have a monthly rolling loan (but at correspondingly lower rates). Like zopa it's a risk since it's not covered under the compensation scheme.

Presumably your girlfriend also has Halifax and HSBC accounts. Halifax does allow one account each plus one joint account - though note that a joint current account will tie your financial histories together, which is something you need to think hard about.

There are various other current accounts paying high interest on low balances, and there are various regular savings accounts - see https://forums.moneysavingexpert.com/discussion/608697

atush

I would not lend peer to peer on your timeframe.

Fill ISAs, fill a regular saver, and fill a Savings acct. Transfer lumps to 1 or 2 year fixed then fill more.

hdog_3

Thanks everyone - I did see the First Direct account however I used to have an FD account which I set up to get £100 but closed in November to get another £100 free money! Therefore I'm not sure if FD will let me set up another account with them so soon after I closed my account. I guess I should call them to find out.

However looking at the sums

I should save £12k plus £2k bonus = £14k
ISA allocation = £5,640 (rounded up)
HSBC savings a/c = £2,500
FD savings = £3,600
Total = £11,740

Therefore if I can open an FD account I still need to find a home for the spare £2,260, however if I can't then I need to find a home for £5,860. Can anyone suggest some options for the two scenarios?

Thanks.

xylophone

http://moneyfacts.co.uk/compare/savings/accounts/search/

jamesd

There might be a six month limit from FD. Close enough to wait for.