First direct + Santander: my plan, practicalities

redonion

I'm currently contemplating a mortgage for a first-time buy and have tens of thousands lying around depreciating in useless savings accounts. A large fraction of that I may end up wanting to use for a deposit in the next six months. I don't have debts.

Having read a little on MSE and discovered to my surprise that cash is currently earning highest interest in current accounts rather than savings accounts, here's my plan for the immediate future.

Is this a good plan? What am I missing out on? Are there practicalities I've missed?

1. Open a first direct account (£125 bonus) and pay my salary into there (keeping my Lloyds TSB account -- see my other recent thread). That goes in at least a few days before the end of the month.
2. Take up the 8% f/d regular saver -- £300 standing order from f/d to there on the 1st of the month.
3. Open a Santander 123 account and pay most of the cash into there.
4. Pay £500 a month into Santander by standing order from f/d on 1st again.
5. After the first month, start standing order for salary - £800 from f/d to LTSB -- again to be paid on the 1st. Obviously there'll need to be a small balance in the f/d account, hence not setting up the standing order the first month - I can transfer a smaller amount in month 1 by phone.
6. If I'm short of cash in LTSB, just transfer some from the Santander account.
7. Use my ISA allowance, of course (not sure yet what - may be able to lock some of it away, so shares a possibility)
8. Put appropriate entries in my diary to take the appropriate actions! i.e.: 1 year later: likely reopen f/d Regular Saver. Also 1 year later: check current status on Santander 123 (presumably by then something else will be better).

One thing I'm in doubt about at the moment is having all that money in one place. Seems like that leaves me vulnerable to fraud. That's unlikely to happen, but it would be a disaster if it did. So I suppose I might modify this plan by opening a post office account and putting say 1/3 of it in there.

All comments welcome!

rb10

If it was me, I wouldn't make any applications for credit (this includes current accounts) in the six months prior to taking out a mortgage.

YorkshireBoy

redonion wrote: »

What am I missing out on? Are there practicalities I've missed?

The Santander account requires a minimum of two DDs set up on it in order to qualify for the 3% credit interest. There's also a £2 per month fee, which may be offset by the switching of utility DDs, which will affect the return (albeit in a small way).

The First Direct account will need 2 DDs or SOs (or a combination) switching to it in order to obtain the £125 incentive.

Are you OK with jumping through a few hoops?

dalesrider

rb10 wrote: »

If it was me, I wouldn't make any applications for credit (this includes current accounts) in the six months prior to taking out a mortgage.

Call FD and ask about a mortgage. If you go for one it will also open a 1st acc at the same time.

But opening a 1st account won't stop you getting a mortgage with FD.
Just remember to get the £125 ( time limited offer) you will have to use the switcing service for at least 2 DD's.

innovate

redonion wrote: »

Take up the 8% f/d regular saver -- £300 standing order from f/d to there on the 1st of the month.

The SO will be set up by FD on the day you open the account, or the day after. Your first payment will be taken then, and the remaining ones for 11 months thereafter on the same day

redonion wrote: »

Pay £500 a month into Santander by standing order from f/d on 1st again.

General: you may have your SOs too close to the money going into your FD. I would leave at least 4 working days between money being paid in and taking some out automatically.

redonion wrote: »

I can transfer a smaller amount in month 1 by phone.

You can indeed. You can also do it online, thus saving phone costs, and it will probably take less time to do it that way.

redonion wrote: »

If I'm short of cash in LTSB, just transfer some from the Santander account.

Why leave any money in FD when you get no interest for it? Don't you have Vantage on your Lloyds account?

redonion wrote: »

Also 1 year later: check current status on Santander 123

You need to keep an eye on the Santander interest all the time. It is variable and not guaranteed for any length of time.
If you have utility, phone and council tax bills, consider moving the DDs for them to Santander, for the monthly cashback.

redonion wrote: »

Seems like that leaves me vulnerable to a fraud.

You seem to be slightly obsessed with the dangers of fraud. Just keep your login data private (always!) and lock the cards that you don't regularly lose away. Don't download stuff that you don't know onto your PC, never click on any link in any email.

innovate

redonion wrote: »

Use my ISA allowance, of course (not sure yet what - may be able to lock some of it away, so shares a possibility)

If you want a S&S ISA, you needs to have a 5-10 year horizon for the investment. If you might need your money in the next 5 years, stick to cash ISAs.

ses6jwg

why stay with lloyds?

why not just switch to first direct and make that your primary account?

Then move 2 of your dds to Santander? (ideally the 1,2 or 3% cashback ones to cover fee)?

rb10

ses6jwg wrote: »

why stay with lloyds?

why not just switch to first direct and make that your primary account?

Then move 2 of your dds to Santander? (ideally the 1,2 or 3% cashback ones to cover fee)?

Remaining with Lloyds means the OP can keep the Vantage interest rate on their account (rather than zero with FD), and has a longer 'time with bank' , which will look good on their mortgage application.

innovate

ses6jwg wrote: »

why stay with lloyds?

why not just switch to first direct and make that your primary account?

Then move 2 of your dds to Santander? (ideally the 1,2 or 3% cashback ones to cover fee)?

Making FD the primary account looks like the worst of the scenarios for me.

If I were the OP, I would

1. keep my money going into Lloyds (having ascertained I have Vantage)
2. move all my DDs to Santander (to get cashback and to have all DDs in one place)
3. send £300 a month from Lloyds to FD, and enough for the DDs (and the minimum £500/mth) to Santander
4. if Lloyds account goes over £5K, syphon some more into Santander (assuming that one is still below £20K)
5. if Santander goes over £20K, syphon excess back into Lloyds. If necessary, open one or two more Vantage accounts, so there's space for another £10K

RB10 is absolutely right, the Lloyds account would look good on the mortgage application. And I think the OP said they have an overdraft there which they don't want to lose.

Whatever they end up doing, there's no need to close the Lloyds account though. As we all know, people here have a dozen or more current accounts, and as long as you know where you have what money when that is absolutely no problem.

noh

Has the op already opened three Lloyds classic current accounts with Vantage filled them with between £3k and £5k and is moving £1k a month between them.?
Therefore earning 3% on the balance.

redonion

innovate wrote: »

You seem to be slightly obsessed with the dangers of fraud. Just keep your login data private (always!) and lock the cards that you don't regularly lose away. Don't download stuff that you don't know onto your PC, never click on any link in any email.

Good advice if taken the right way I'm sure, but I don't think it's realistic to not "download stuff that you don't know". And whether my login data is private is not something completely under my control, in practice.

It's not so much the risk of fraud itself that I find most problematic, as the attitude of financial institutions in response, which seems to tend to be "it must be the customer's fault, and their responsibility, because our systems are perfect".