best saving options?

naturegirl_2

I have a 2yr interest only mortgage (as I am planning to sell my house and move after that period) I am now only paying out half the amount from my previous mortgage and would like to put some money away every month. I thought of a mini cash isa and/or Premium Bonds. It wouldn't be alot of money but I would feel better if I was making an effort to save something each month.
Which would be my best option.? many thanks

newfoundglory

What you could to do depends on a number of things; such as how long you want to pay into a savings account for (if you choose a regular savings account that is), how much you want to save, what your tax position is and how/when you want to access your savings. Some things you might like to consider before choosing:

An ISA is always a good option as interest is paid tax-free! However, this really depends on whether you are a higher or lower rate tax payer. If you are a lower rate taxpayer then take the Halifax Regular Saver account for example (7% gross on monthly contributions of between £25 to £250) - this might be your best bet, as even after tax the net rate (5.6%) is higher than the vast vast majority of cash ISAs. However, if you are a higher rate taxpayer then a good mini cash ISA is by far the better choice.

Of course, even if you were a lower rate taxpayer it might still be better to pay into a cash ISA first - depending on what you want your savings for, how long you want to leave them in the account and what you see looking into the future. If you knew you didn't want to access your savings for a number of years than the cash ISA might be better because it will remain tax free for as long as its in the account (unless government decides otherwise); I suppose this depends how you view ISA allowances since you only get the chance to tuck away up to £3000 each year in cash tax-free; if you don't use it or draw it out of the account then this opportunity is lost forever!

You would have to look at your personal situation to work out whats best for you... then go hunting for the best account rates!

surfcat

I hope the market doesn't crash within two years, leading to negative equity. You've taken a bit of a risk IMHO.

naturegirl_2

I'm a low tax payer (self employed). I just thought I should have some savings which I cant get at too easily and would help with the mortgage if anything should happen. My house is worth over twice what I bought it for 3 years ago so even if prices dropped dramatically I would still be OK. What ever I save (£150 - £200 per month) needs to work to the max.

Tim_L

If you're paying no tax, one of the regular savers would be a reasonable option - HSBC offer 8% if you open a current account with them, and you can get over 7% with others. You do have to keep up payments with them too, and watch to see what happens at the end of the intro period or initial year's investment because rates can drop off extremely fast.

Otherwise, a cash ISA is the obvious safe choice. Alliance & Leicester is a decent choice at 5.4%. The main thing here is not getting the absolute tip-top interest rate though - you may as well have it, but it's a relatively small amount annually on the levels you'll be saving - it's building up the pot itself.

naturegirl_2

Thanks for advice on ISA's I'll look into them more. Any advice on regular savings with Premium Bonds. some people seem to think that the odds of winning are in parallel with the low interest rates savings aquire?