High Rate HTB ISA or Low Rate LISA?

Hele_an

I have a Issue 1 Santander Help to Buy ISA currently getting 4.25% interest. However I am conscious that I do not get any of the state benefit until I am in a position to purchase a home.

My question is if to move these funds to a lower interest LISA but use the benefit of the monthly top up to compound the interest payments?

I have approx £4.3K in the ISA and my most recent interest at the end of March was £166.

Thanks!

glaister

The interest rate for a LISA will still be lower than your HTB ISA, even with the monthly top up. The monthly government bonus is 25%, so it will effectively just change an interest rate of 1% to 1.25%. 4.25% in an ISA is unbeatable!

There are of course many other factors to consider in deciding whether a LISA or HTB ISA is better for you. The article on the main site sets out the pros and cons: https://www.moneysavingexpert.com/savings/lifetime-isas/

I was in a similar position to you and decided to hedge it by keeping my HTB ISA as well as opening an ISA. You only get the government bonus on one of them, so I treat my HTB as a high-interest cash ISA and my Lifetime ISA as savings for buying a home. I am not planning on buying in the near future, and plan on gradually move money from my HTB ISA to my Lifetime ISA nearer the time (only £4,000 per year - transfers from non-LISAs use up the current years allowance). Might be an option for you.

aj23_2

Can you afford to open a LISA and deposit £4k into and maintain your HTB ISA?

I have issue 1 Santander HTB ISA too. I opened a Skipton LISA in Feb 2019, added £4k, and took advantage of the one off offer to transfer into my LISA what I had put into my HTB ISA up until 6 April 2017, so I got an extra extra bonus.

I still pay into the HTB ISA because the rate is so good, but I use regular savers to save in order to fund the LISA deposit too. £1 bonus on £4k is 100% worth doing .

Hele_an

Can you pay into two ISAs in one financial year? I thought that was no go?

I cannot afford to max out payments into two accounts (barely max out on the one I have at the moment as it is) but maybe transferring the bulk into a LISA and keeping the HTB open as a high rate savings is not such a bad idea.

aj23_2

Hele_an wrote: »

Can you pay into two ISAs in one financial year? I thought that was no go?

I cannot afford to max out payments into two accounts (barely max out on the one I have at the moment as it is) but maybe transferring the bulk into a LISA and keeping the HTB open as a high rate savings is not such a bad idea.

You can't open two in the same tax year I believe. It's perfectly acceptable to open one and then another in different tax year, and pay into both.

For example, you can only deposit £2400 into HTB ISA and £4000 into LISA in same tax year. That still leaves £13600 of your allowance.

I agree with your other option. Transfer £4k from HTB to LISA, and keep paying into the HTB thereafter.

Alexland

Hele_an wrote: »

Can you pay into two ISAs in one financial year? I thought that was no go?

aj23 wrote: »

You can't open two in the same tax year I believe. It's perfectly acceptable to open one and then another in different tax year, and pay into both

You can open as many ISAs as you want in the same tax year - the restriction is that you can only contribute to one of each of the 4 types (Cash ISA inc HTB, S&S ISA, IF ISA and LISA in cash or s&s) up to the product limits and £20k total limit across all types.

Alex