'Save to Buy' savings accounts

reaprr

Hi All,

My partner and I are currently saving for a house deposit (first time buyers). We are aiming for at least £20k of our own savings (plus £5-10k from parents) and want to start house hunting January 2016.

I recently saw the Nationwide 'Save to Buy' ISA, which gives you access to their Save to Buy 5% mortgage if you meet the regular saving criteria.

Now, we aren't too fussed about the 5% Nationwide mortgage as we are aiming for a 10-15% LTV. So I was wondering if there are any more of these 'Save to Buy' style regular savers (ISA or otherwise)? Perhaps there are some that give you a bonus rate?

I would also be keen to hear peoples experiences of this type of savings account, are they worth it or are they just a bit of a gimmick?

bristolleedsfan

I hold Save To Buy 2, non ISA version ( already hold an ISA for this tax year) - being as 2% appeared bit of a non brainer ( already hold all 2%+ accounts that appeal to me) to plant 18500+ lump sum, with 1 withdrawal upon closure permited.

IMHO, very unlikely Nationwide will reduce Issue 2 rate, more likely it will close Issue 2 and launch Issue 3 at a lower rate.


For those who want to move funds out of 1.5% accounts and have exhausted higher paying account options, this is an option in addition to Leek B.S standard regular saver, with its withdrawal upon closure penalty still making it a good option for "some savers" who have no intention of taking out a Leek B.S morgage

http://www.leekunited.co.uk/savings/products/regular-savings/homebuyers-regular-savings

bowlhead99

A couple of years back I had a NW save to buy account with some bare minimum amount going into it each month to qualify for the mortgage if my plans changed and I needed it - at the time, I think the rate was about 2.5% or so, which wasn't significantly different to elsewhere for locked-in savings, but the bonus was some sort of cashback available on your mortgage if you applied for one, based on the account balance (which you could top up to £20k or something at the very last minute to qualify for the top amount of cashback). I ended up not using it and simply closing the account a while after I'd bought the house on a different mortgage product (lower LTV).

I suppose it's a bit of a gimmick given you can get 5% in Nationwide's own current account and if you had £20k that you wanted in one place you'd be getting a better rate in a 3% current account at Santander instead of 2% or so in save to buy. But for a foot in the door on a mortgage application, it can't hurt - especially if it gets you access to potential cashback or some other perk.

Worth keeping your options open if you do find different providers with similar deals - just commit the minimum cash to any of them to qualify for their deal, because you probably want flexibility if you end up needing your money in a hurry to complete on someone elses mortgage.

bristolleedsfan

I hold Save To Buy 2, non ISA version ( already hold an ISA for this tax year) - being as 2% appeared bit of a non brainer ( already hold all 2%+ accounts that appeal to me) to deposit 18500+ lump sum, with 1 withdrawal upon closure permited.

IMHO, very unlikely Nationwide will reduce Issue 2 rate, more likely it will close Issue 2 and launch Issue 3 at a lower rate.


For those who want to move funds out of 1.5% accounts, this is an option in addition to Leek B.S standard regular saver, withdrawal penalty upon closure still makes it a good option for "some savers"

http://www.leekunited.co.uk/savings/products/regular-savings/homebuyers-regular-savings

ColdIron

bristolleedsfan wrote: »

IMHO, very unlikely Nationwide will reduce Issue 2 rate, more likely it will close Issue 2 and launch Issue 3 at a lower rate.

It's probably worth pointing out that Nationwide did reduce their Loyalty Saver a month or two ago. They Introduced the Issue 5 with a lower rate than the previous Issue 4 and then reduced the rate on the Issue 4. I think they did the same to the Flexclusive Saver

reaprr

bowlhead99 wrote: »

Worth keeping your options open if you do find different providers with similar deals - just commit the minimum cash to any of them to qualify for their deal, because you probably want flexibility if you end up needing your money in a hurry to complete on someone elses mortgage.

Thanks, that is exactly what I was thinking - we will of course be using a mortgage adviser but if I can be smart with my money now it might open up a few more options.

bristolleedsfan wrote: »

For those who want to move funds out of 1.5% accounts, this is an option in addition to Leek B.S standard regular saver, withdrawal penalty upon closure still makes it a good option for "some savers"

http://www.leekunited.co.uk/savings/products/regular-savings/homebuyers-regular-savings

That is a strange account. The T&Cs say the monthly deposits must be the same as your initial deposit, which doesn't really appeal to me - I think I would like more flexibility!

bristolleedsfan

ColdIron wrote: »

It's probably worth pointing out that Nationwide did reduce their Loyalty Saver a month or two ago. They Introduced the Issue 5 with a lower rate than the previous Issue 4 and then reduced the rate on the Issue 4. I think they did the same to the Flexclusive Saver

Save to Buy 2 rate wasnt reduced though and as was pointed out in an earlier post, Save to Buy 1 paid a higher rate which wasnt reduced merely made a closed issue some ago and superceded by lower paying Issue 2.

bowlhead99

reaprr wrote: »

Thanks, that is exactly what I was thinking - we will of course be using a mortgage adviser but if I can be smart with my money now it might open up a few more options.

One way to 'be smart with your money' is not to use a mortgage adviser, if you are willing to put the time and effort in to looking around at rates yourself and don't have a particularly difficult 'case' for the mortgage adviser to solve for you. There will be some lenders that don't deal with brokers anyway, like HSBC.

Obviously a broker can give you a snapshot state of the market and focus in quite quickly on the deals that would be good for you, but if you're not bad with numbers, and you're not dealing with poor credit or a partner who's self employed and can't prove their income very well, I question what value the brokers can really add for the amount of money they take out for themselves.

If your credit history is fine and you believe your affordability is fine then you can just shop around on all the different deals for yourself, starting with the biggest highstreet players and always looking at the 'existing customer' deals (like the Flexdirect ones at Nationwide) because moving banks is never difficult these days. Certainly beats paying out a fixed fee or a percentage of the amount borrowed, if you don't have to.

For example you can just go and put dummy numbers in Nationwide and see that a 4 year fix costs 4.59% on 10-15% deposit but only maybe 3.54% if you have 15.01% deposit...(with an application fee but free basic valuation etc); if you like the rates you can go through the 'how much could you borrow' wizard and get a pretty good indication. Devoting a weekend to doing that with all the major providers on the price comparison chart will give you a pretty good idea of what people in your situation are paying.

reaprr

bowlhead99 wrote: »

One way to 'be smart with your money' is not to use a mortgage adviser, if you are willing to put the time and effort in to looking around at rates yourself and don't have a particularly difficult 'case' for the mortgage adviser to solve for you. There will be some lenders that don't deal with brokers anyway, like HSBC.

Obviously a broker can give you a snapshot state of the market and focus in quite quickly on the deals that would be good for you, but if you're not bad with numbers, and you're not dealing with poor credit or a partner who's self employed and can't prove their income very well, I question what value the brokers can really add for the amount of money they take out for themselves.

If your credit history is fine and you believe your affordability is fine then you can just shop around on all the different deals for yourself, starting with the biggest highstreet players and always looking at the 'existing customer' deals (like the Flexdirect ones at Nationwide) because moving banks is never difficult these days. Certainly beats paying out a fixed fee or a percentage of the amount borrowed, if you don't have to.

For example you can just go and put dummy numbers in Nationwide and see that a 4 year fix costs 4.59% on 10-15% deposit but only maybe 3.54% if you have 15.01% deposit...(with an application fee but free basic valuation etc); if you like the rates you can go through the 'how much could you borrow' wizard and get a pretty good indication. Devoting a weekend to doing that with all the major providers on the price comparison chart will give you a pretty good idea of what people in your situation are paying.

I am actually quite surprised by that advice. Considering I could go to a mortgage advisor and not have to pay them a penny myself (if they get commission from the lender) then it seems like it would be stupid not to go to one!

bristolleedsfan wrote: »

Save to Buy 2 rate wasnt reduced though and as was pointed out in an earlier post, Save to Buy 1 paid a higher rate which wasnt reduced merely made a closed issue some ago and superceded by lower paying Issue 2.

I did misread your earlier post, so thanks for re-iterating it. I have had another look at the Nationwide Save to Buy and have seen it does include cashback:

£0 to £2,499 = £0 cashback reward
£2,500 to £4,999 = £250 cashback reward
£5,000 to £9,999 = £500 cashback reward
£10,000+ = £1,000 cashback reward

I thought it only gave you 'access to the 5% mortgages' but this has made me re-consider (unless anyone can suggest a similar deal?)

badger09

These?

http://www.newcastle.co.uk/savings/big-home-saver.aspx

bowlhead99

I did misread your earlier post, so thanks for re-iterating it. I have had another look at the Nationwide Save to Buy and have seen it does include cashback:

I thought it only gave you 'access to the 5% mortgages' but this has made me re-consider (unless anyone can suggest a similar deal?)

Yes, the availability of cashback and the potential to be more 'known' to Nationwide for the purpose of perhaps doing an 85-95% mortgage application if I needed to, was the reason I had their account, as a 'hedge my bets' option. You can put the minimum £50pm into the account for the bare minimum number of months (leaving you with an accumulated, say, £400 in the account) and then if you know you're going to use their mortgage, put £10000 in the account the month before you apply and say you want £1000 cashback because you've been able to save up £10400 in the account. They don't mind if you put a lot or a little in the account from time to time or quite how you do it, unless you have something like £20000 in the account at which point they just stop paying you interest.

The T&C's do say that "If you complete a Save to Buy mortgage you will be eligible for a cashback reward. The amount of cashback is confirmed in the welcome letter you received when the Account was opened and will be based on the combined balance of all named mortgage applicants’ Save to Buy Savings Accounts at the time of their application for the Save to Buy mortgage."

So, potentially not everyone applying for the StB mortgages will get the same cashback scale, worth checking what the current rate is at the point you open the account. They can presumably modify this for new customers over time, so make sure you're not looking at an outdated rate sheet.

In the end of course you might find you don't want to use the STB mortgage because after paying all your fees and knocking off the cashback and considering what rate you're on, it isn't worth it compared to a rival product from Nationwide or elsewhere. In which case you can just close the account, no harm done.

reaprr wrote: »

I am actually quite surprised by that advice. Considering I could go to a mortgage advisor and not have to pay them a penny myself (if they get commission from the lender) then it seems like it would be stupid not to go to one!

The myth of 'paid by commission' services is that by earning and keeping an introducer fee from the provider, it hasn't cost you anything. Do they magic themselves a salary out of thin air? Or do they get a kickback from a mortgage provider who has built the price of the kickback into the interest rate and application fee that he charges to you ?

It is perfectly feasible that they may convince you to apply for a product that is not necessarily the absolute best option out there but tell your that you are 'more likely to be approved' for that one, or 'this group is handling applications faster and the price is about the same' or something, which if you accuse them of bias might be quite a defensible postition if it's all boiling down to some judgement. But by needing to be paid by the company they place the mortgage with, potentially at different rates depending who they put the business with, is unlikely to give you the best 'whole of market' service.

I mean it could be whole of the market that is willing to pay them commission, but if they are not charging you an explicit fee it won't be literally all the market that exists, because some groups don't pay commissions. If one group pays 0.5% commission and another pays 0.75% commissions, then you would want to have an agreement that anything that paid them over 0.5% would get rebated to you, to show there was no bias in the choices. But that would make it a lot more visible that they were taking a sizeable amount of cash out of the process.

And I don't think you would get pointed towards HSBC or First Direct who are trying to sell their top offers direct to the public and so wouldn't pay a broker commission. The only way they would point you to those providers is if you paid them an explicit fee out of your own pocket to do the legwork and recommend them to you if they were legitimately the best choice.

Basically once you get into the nuts and bolts of how exactly they get remunerated, you realise that the only way to get an honest result is for you to pay them an explicit fee (flat fee or percentage based) and then rebate to you any commission whatsoever that they receive off it. You might get lucky and pay them a £500 fee and get £400-£600 commission straight back. But you might get 'unlucky' where they tell you that a 5 year fix at First Direct with unlimited overpayments is actually the best deal, and there is no commission coming back to you, and you could have found it on the First Direct website yourself.